Comments on the FED rate cuts

By Thomas Lehr, Capital Market Strategist at Flossbach von Storch AG

“Although the timing is unusual, the interest rate cut comes as no surprise to us. Unlike other central banks, such as the ECB, the Fed has the greatest firepower. In view of the epidemic, it is now using it. Many investors remember the last comparable measure in December 2008, in the midst of the financial crisis. In the short term, this is therefore likely to further unsettle the markets."

"The much more exciting question, however, is how further falling US interest rates will affect the behaviour of US investors in the long term. Consider that corporate earnings yields across the board are currently around four to five percent higher than the yield on an acceptable bond portfolio. We would therefore not be surprised if the willingness of American investors to accept higher valuations in the equity market also increases."

"At the very least, the fact that despite record low interest rates, equity market valuations are not noticeably different from those of 30 years ago provides a certain buffer, even in the event of significant corporate earnings declines. We therefore do not expect a prolonged bear market even in the event of a pandemic. In the long term, there is probably no alternative to equities for investors in an environment of low interest rates. At least not if they want to preserve their assets over the long term and above all in real terms - i.e. after inflation.”

Thomas Lehr
Thomas Lehr

Serge Vanbockryck

Senior PR Consultant, Befirm


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Over Flossbach von Storch

Flossbach von Storch is een van Europa's toonaangevende onafhankelijke vermogensbeheerders met meer dan EUR 70 miljard aan beheerd vermogen en meer dan 300 medewerkers. Het bedrijf werd in 1998 in Keulen opgericht door Dr. Bert Flossbach en Kurt von Storch. Tot de cliënten behoren fondsbeleggers, institutionele beleggers, vermogende particulieren en families. 

Alle beleggingsbeslissingen worden genomen op basis van de eigen wereldvisie van het bedrijf, die gebaseerd is op een kritische analyse van de economische en politieke context. Als door de eigenaar geleide onderneming is Flossbach von Storch niet gebonden aan de richtlijnen van een bank of een onderneming.