Comments on the FED rate cuts

“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.”