Euro am Sonntag interview: Fund manager Elmgreen: “The 1 million dollar question is still in the room” | news
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by Peter Violence, Euro am Sonntag
Kasper Elmgreen has been head of shares at the French asset manager Amundi since 2019. In an interview, he explains how significantly rising prices affect the selection of stocks, bonds and real estate.
uro on Sunday: Mr. Elmgreen, the subject of inflation is currently dominating the markets. How do you see the price development?
Kasper Elmgreen: Let me go back a little. Due to Corona 2020, we had the strongest economic contraction and then the strongest rebound in decades. Since November 2020 there has been optimism again that economic normalization is imminent. The demand from consumers and industry is therefore increasing rapidly, but the supply is limited in some areas such as computer chips and raw materials. All of this together drives up prices. What is important, however, is that wage prices have not yet risen and are even below pre-crisis levels in the USA, for example.
That means you can give the all-clear?
No, because the million dollar question is still on the table. What happens after the normalization phase? How do the multi-trillion dollar aid packages and the extremely loose Monetary policy of central banks worldwide? We just don’t know. The risk of long-term inflation is therefore not off the table.
Which asset classes are recommended?
Bond investments are very dangerous in these circumstances. After 40 years of bull market, the chance of losing money, especially with government bonds, is relatively high. Real assets, on the other hand, have advantages in this environment, which means that stocks and real estate remain interesting.
Which stocks do you think are attractive in this uncertain environment?
First, companies with great pricing power are very interesting. Because they can pass on price increases to customers. A classic example are motorway operators who are allowed to increase their prices according to the extent of the inflation rate. But companies with strong brands from the consumer and medical sectors are also among our favorites.
And secondly ?
Second, companies with high profit margins are also interesting because they can better absorb price shocks.
Do you prefer value stocks or growth stocks like Amazon or Alphabet when making your selection?
The valuation differences between growth and value stocks have recently been greater than ever before. Only since November of last year have value stocks outperformed growth stocks in terms of yield. A trend that is likely to continue as we assume that interest rates are likely to rise rather than fall in the next few years. And rising interest rates have a more positive effect on value than on growth stocks.
In which regions can you still find attractive values?
Europe is a classic value market with many industrial stocks, while the USA is more of a center for growth stocks, for example in the technology sector. Historically, the valuations in Europe are still favorable, which is no longer the case in the USA.
How do you see the opportunities in emerging markets?
In the long term, stocks from the emerging markets are an attractive investment opportunity simply because of their above-average growth opportunities. However, one should not make a mistake and lump all emerging countries together. It is essential to take into account the framework conditions in the respective country, for example with regard to the type of inflation.
In what way?
As resource-rich countries, Brazil and Russia are likely to benefit from rising prices for all kinds of soil conservation, but this trend is weakening importing countries such as Turkey and India. You have to be very selective in your selection.
Selectivity is a good keyword: is the current environment more suitable for stock pickers?
Yes, after years of steady upward and downward trends in markets, the correlations are now significantly lower. This can also be seen in the fact that in May of this year 70 percent of active managers in the USA beat the return on the small cap index Russel 1,000. This is the best value since 1992.
Amundi Funds European Equity value: The fund managed by Andreas Wosol invests in valuable companies across Europe. Financial service providers and cyclical companies together make up around 40 percent of the portfolio.
Image sources: Amundi