In the coming year, the economists at Deka and Deutsche Bank expect global economic growth of a good four percent, stabilizing base inflation of two percent in the euro area, as well as rising yields and higher dividend payments.

That emerges from the capital market outlook published on Tuesday.

Should the new virus variant prove to be vaccine-resistant, however, this could set the recovery back significantly.

“This new terrible news from the virus front marks the end of a year that was marked by bankruptcies, bad luck and mishaps anyway.

The world economy presented itself more as a chaos economy with many bottleneck problems, ”said Deka Bank chief economist Ulrich Kater.

Madeleine Brühl

Editor in business.

  • Follow I follow

For 2022, Deka economists expect GDP growth of 3.7 percent in Germany in the base scenario. The strategists at Deutsche Bank even forecast economic growth of 4.5 percent. For the first time in the history of the world economy, the pre-crisis level and the original growth path could be quickly reached again, said Kater. The reason for the surprisingly strong corona economy is the strong demand from private households. Furthermore, the industry coped well with the corona-related restrictions in the past year. Deka economists expect the supply-side bottlenecks to resolve in 2022. The all-determining topic in the coming year will probably remain inflation.

"If you had wanted to avoid the wave of inflation, the global economic stimulus programs should only have been half as large," states Deka chief economist Kater.

For the inflation development in the next two years, the corona-related price increases are less important than possible second-round effects.

Deka economists are assuming that core inflation will be around two percent higher than in the pre-crisis period and are expecting an inflation rate of 3.5 percent in Germany and 2.6 percent in the euro zone in the coming year.

Speculation about delayed rate hikes

The current inflation estimates are also moving the main central banks into focus and thus the question of how the bond purchases will continue. Fed chief Jerome Powell's remarks on Monday about Omikron's potential economic risks fueled speculation that rate hikes could be delayed. Powell promised that the Fed would stand by its price stability target. Investors also hoped for new clues about US monetary policy from a hearing. "Powell is known for calming the markets," said investment strategist Ilya Spivak from brokerage firm DailyFX. The high inflation and the further economic recovery will mainly force the US Federal Reserve to act, the experts at Deutsche Bank said.

“I assume that prices will remain at a higher level than we were used to in previous years,” says Stefan Schneider, Germany’s chief economist at Deutsche Bank. He assumes that the interest rate turnaround will come in the USA in mid-2022 and that the ECB will follow suit at the end of 2023. Deka economist Kater shares this view. But even if the ECB preferred to raise interest rates, the real interest rate would not rise above the inflation rate: "The 20s will be the second decade of negative real interest rates and thus also a decade for real assets."

Corporate earnings and excess demand have fundamentally supported the performance of stocks. Deka capital market strategist Joachim Schallmayer is convinced that "equities are by far the best way for investors to get through the crisis." How this development will continue in 2022 will depend on monetary policy normalization and inflation. In contrast to bonds, stocks performed relatively well when inflation rose and could offer some protection, said Ulrich Stefan, Deutsche Bank's chief investment strategist for private and corporate clients. Both Deka and Deutsche Bank are forecasting a Dax score of at least 17,000 points for the end of 2022.

Meanwhile, the Dax has continued its downward slide. By Tuesday it had lost 5.5 percent at its peak and at times stood at 15,217 points. Tourism and aviation stocks and banks in particular have come under resolution. "The market played through on Friday that a new virus variant was coming, against which the vaccines could not develop the same effect as against the old ones," said Schallmayer. "We are assuming a phase of great uncertainty, but still expect an economically stable catch-up movement." In contrast, the latest statement by Moderna boss Stephane Bancel caused further unrest in the markets. He assumes that the current corona vaccines are probably not as effective against the new Omikron variant as against the previous ones, said Bancel. The paper lost 5 at the start of trading,6 percent and fell to $ 348.