20. Dez 2017
Helaba economic and capital markets outlook 2018: “Shopping centre: nothing is free"
In 2018, the global economy will grow as dynamically as in the previous year at a rate of 3.4 per cent. However, the euro area and Germany will not be able to sustain their fast pace from 2017.
- Global economy already at top level
- Interest rate turnaround in the Eurozone only in 2019
- High valuation of the DAX holds significant downside risks
In 2018, the global economy will grow as dynamically as in the previous year at a rate of 3.4 per cent. However, the euro area and Germany will not be able to sustain their fast pace from 2017. Nevertheless, Germany and the Eurozone will grow above potential at a rate of 2 per cent. Unemployment rates will fall further. “Despite this, there remain considerable differences between those countries that have undertaken reforms and those that have so far refused to do so. The former includes Spain, which will grow at 2.8 per cent in 2018. The latter includes Italy with a growth rate of 1.5 per cent,” explained Dr. Gertrud R. Traud, Chief Economist at Helaba, when presenting the study.
For the USA, a slight acceleration of average annual growth to 2.5 per cent will emerge in 2018 (previous year 2.2 per cent). Here Helaba economists assume a moderate lowering of taxes. “The investment climate in the USA will be burdened by the unpredictable trade policy under President Trump,” said Traud. There will be less stimulus from Asia in the coming year compared with 2017.
In total, the study contains 18 country analyses as well as short reports on the federal states of Hesse, Thuringia, North Rhine-Westphalia and Brandenburg. The focus this year is on consumption as an economic factor, accounting for at least 50 per cent of gross domestic product. As places of consumption, shopping centres represent these important components and are the symbol of the economy and capital markets in the baseline scenario in 2018. The currently favourable economic situation does not come for free, however: its price is inflation.
Inflation and monetary policy
Whilst the rise in inflation has to date been primarily due to increasing energy prices, increasing core rates are also to be expected in 2018. In the USA, the inflation rate will be significantly above 2 per cent. In the Eurozone and Germany, it is edging towards the European Central Bank’s (ECB’s) inflation target of 2 per cent. “There can therefore no longer be any talk of ‘undesirably low’ inflation rates,” said Traud.
In this environment, some central banks are once again focusing on interest rate rises. The US Federal Reserve will continue its monetary policy normalisation course. The ECB will also react, but with a delay. Helaba experts expect that Mario Draghi will pull the interest rate lever himself before he retires from November 2019. It is anticipated that he will reduce the deposit rate from
-0.4 per cent to -0.2 per cent in spring 2019. During the course of 2019, it is expected that the repo interest rate will be increased from zero to 0.25 per cent.
The euro-dollar exchange rate is likely to initially move at the lower end of a range from 1.10 to 1.20 in 2018. The looming interest rate turnaround by the ECB will raise the euro to 1.20 during the later part of the year.
Extremely relaxed monetary policy has led to a partly considerable increase in the valuation of shares, bonds and real estate in recent years. When making investment decisions, a great deal of caution is advised due to these high valuations. With bonds, valuation issues increasingly arise due to higher inflation rates. Over the course of 2018, the yield for 10-year German government bonds will increase to 1 per cent. There is a threat of losses. The first choice for new investments should therefore be short- and medium-term maturities.
Share investors have already given too much premature praise and have become markedly careless. This is shown by the historically low implied share volatility. The valuation of the DAX is already moving above the long-standing normal band, and is therefore expensive. For the baseline scenario, Helaba experts are assuming a return to a price/earnings ratio range of between 10.5 and 13. Using realistic assumptions for earnings growth gives a range for the DAX of 10,500 to 13,500 points. At the current level, the downward risks of the DAX are more pronounced than the upward potential.
In the meantime, real estate has become equally highly valued. However, they can retain their relative appeal despite alluring yields in the bond market. Gold could strike a new, sustainable upward trend in 2018. The price of the yellow metal is expected to climb above 1,400 US dollars per ounce.
Experts attribute a 70 per cent probability of occurrence to this main Scenario.
Negative alternative scenario “abandoned construction site” (10 per Cent)
In the negative alternative scenario “ruin”, to which Helaba experts attribute a 10 per cent probability, structural weaknesses burst open and lead to a global downturn. Politics reacts with protectionism. Globalisation and international trade are pushed back. Germany slides into a recession. The downward trend grips the European Union, meaning that the unresolved structural problems of the monetary union once again emerge with force. Gold and the US dollar live up to their reputation as emergency currencies in times of high uncertainty. The euro-dollar exchange rate falls to 0.90. The DAX crashes towards the 8,000-point mark.
Positive alternative scenario “palace” (20 per cent)
Things are going splendidly in the alternative scenario “palace”, to which Helaba economists attribute a 20 per cent probability. The global economy reaches an impressive level of growth. Brisk trade and investment activities, as well as advances in productivity, open up new possibilities. In this environment, the conversion of the European Union into a community of competition is successful. In Great Britain people realise that the statics are missing for leaving the EU, with the result that these conversion plans are abandoned.
As a result of high growth levels, inflation increases significantly above the central banks’ stated goal of 2 per cent. The ECB initiates the interest rate turnaround as early as 2018. On the bond market there are massive losses. The DAX exceeds the 15,000-point mark.