The current stock market environment with its price corrections is anything but a brief slip for the Bad Homburg asset manager Feri.

At the press conference on Tuesday, CEO and chief investment strategist Heinz-Werner Rapp spoke of the "beginning of a tectonic market shakeout".

According to him, the capital markets are facing a real turning point.

The weakness of the stock exchanges since the beginning of the year confirms a tectonic upheaval that was already apparent before the Russian attack on Ukraine.

Rapp cites the new investment environment with structurally increased inflation as the cause.

The Ukraine war exacerbates this constellation.

For Rapp, the "clear transition to an inflationary regime" is certain.

Markus Fruehauf

Editor in Business.

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In his opinion, the trigger for this is the massive monetary inflation by the central banks since the financial crisis of 2008. The balance sheets of the leading central banks have increased tenfold since 2008 as a result of bond purchases and other expansive measures such as negative interest rates.

According to Rapp, this corresponds to a total of more than $25 trillion in money creation.

With the war-related rise in prices for gas, oil, wheat and important industrial metals, inflation is now finally becoming a game changer on the markets.

Two-digit inflation rate is possible

In addition, there is a higher risk of further disruptions to global supply and supply chains due to Russia's economic isolation.

"The overall scenario is currently changing radically," said Rapp.

Stagnation is looming on the horizon, i.e. weak economic growth combined with high inflation.

It will then be difficult for central banks to counteract this with monetary policy, because an interest rate hike can also slow down weak growth.

Rapp also classifies stagflation as extremely challenging for the stock markets.

This still has to be understood and priced in over time.

Feri still considers the inflation forecast of the European Central Bank (ECB), which was recently increased from 3.2 to 5.1 percent, to be too low.

With the prices for oil, gas and other raw materials that have already been reached, the inflation rate in the euro area will probably be more than 6 percent this year.

Should there be reduced deliveries of oil and gas from Russia to Europe, a double-digit inflation rate is even possible.

High inflation rates have the effect of an additional tax on consumption, so that the upswing as such is in question.

"This exacerbates the ECB's dilemma," said chief economist Axel D. Angermann.

If the central bank does more to combat inflation than previously announced, for example by reducing bond purchases more quickly, this could act as an additional driver of the recession.

In this environment, Feri fears a real turning point for the stock markets, i.e. the end of the ten-year bull market.

The bond markets also threatened to come under pressure.

Professional investors should diversify their portfolios very broadly in the future and hedge against geopolitical risks and inflation with gold and other commodities, Feri recommends.

Economically, Feri can look back on a very successful 2021 financial year.

Assets under management increased by more than 30 percent to 56.6 billion euros.

Total revenues increased by almost 40 percent to 275 million euros.

The operating profit before taxes, interest and depreciation increased from 41.8 million to 82.9 million euros.

All of these key figures have reached a record level, emphasized CEO Marcel Renné.

He named the good development in investments, the significant increase in the institutional and private customer base and strong demand for alternative investments such as private equity, infrastructure and real estate as drivers of growth.