Euphoria at a high level
The Dax has meanwhile climbed to a new high for the year. And the all-time high is not far off either. If you carefully read the latest Sentix analysis, which measures the mood on the markets, you will notice that the number of bulls on Wall Street has skyrocketed. With 47 percent optimists, the highest value since autumn 2021 has been reached. But such surges of euphoria are usually not suitable for continuing to count on rosy times. Inflation rates have fallen. But that still doesn’t mean the all-clear. Especially when you consider that the OPEC+ countries have cut their output, which will push energy prices up again. In spite of everything: The markets twitch from time to time – but this does not detract from the optimism. The mood is still dazzling.
Interest rates will continue to rise
Whether rightly so remains to be seen. Because one thing is clear: inflation will continue to accompany us as a problem and mood killer, even if the markets ignore it from time to time. Because it will probably take quite a while before the central banks’ target rate of around two percent is reached. Interest rates will therefore continue to rise, even if probably not at the pace seen in recent months. Because – as I said – the reduction in OPEC+ production volume, plus high settlements by the social partners in the wage dispute – none of these are reasons that call for relaxation. After all, what do companies do when they have to cope with wage agreements of 10 percent and more? They raise the prices and pass them on to their customers!
Pricing power is the be-all and end-all
But here we come to the crux of the matter: only companies that have the appropriate pricing power can implement this. And it is precisely on these companies that we are concentrating. Corporations with pricing power have usually built a so-called economic “moat” around their business, which protects them from too much competition. They are not so easy to replace because they offer patent-protected products, or because the costs of switching from their services or products to which the competitor is simply too high. Or they have such a dominant market position that there is simply no way around their products. This applies, for example, to the Alphabet subsidiary Google.
In focus: The Total Shareholder Return (TSR) over the next 5 years
Pricing power well and good. But that alone is not enough for us. The most important decision criterion for us is the total shareholder return (TSR) over the next 5 years, i.e. the expected total return on the share, which is made up of the price development and the dividend payments. And it is precisely such companies that dominate our mandates, such as the Frankfurt equity fund for foundations and even more so the Frankfurt UCITS ETF – Modern Value. Here you will find global market leaders such as Amazon, Microsoft or Roche Holding. But also less well-known companies such as the US operator of top-level domains such as .com and .net, Verisign, or GruppoMutui Online
Italian online mortgage broker based in Milan. And also from the Very few investors have ever heard of Admiral Group. Here he belongs British insurance group is one of the leading motor insurers for private customers and is the third largest motor insurer in Great Britain. In addition, he operates a number of Internet comparison portals and is one of the absolute gems in our portfolios.
Conclusion: We remain, as they say in football, in a controlled offensive, always keeping our foot on the brake and relying on owner-managed companies with pricing power, the only reasonable answer in this inflationary environment.