Despite these apparent trends and associated rather difficult starting conditions, the prospects for individual asset classes actually improved now after the corona crash, compared to last year 2019. This applies especially to risky investments as stocks and corporate bonds. The latter are bolstered by the central banks' purchase programs. In addition, companies can refinance themselves very cheaply thanks to the liquidity injections. And compared to other asset classes, there is no alternative to equities anyway. An annual performance of 8-9% though, as averaged over the last two hundred years, will hardly be possible. The backdrop to all of this is a depressed medium-term economic outlook and with it profit prospects.

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Because after a race to catch up by mid-2022 - fueled by economic stimulus packages and aggressive central bank policies, among other things - global growth rates are likely to fall rapidly again - to a below-average of just under 3% (average world growth rate over the last 20 years: 4.5-5%). One factor hampering growth is the very high leverage level of governments and companies, severely limiting their future scope for investment. Despite government aid programs, many companies have had to draw additional credit lines to cope with the negative consequences of corona. At the same time, public debt ratio’s have also risen drastically as a result of the aid and stimulus programs that were launched. Moreover, Corona will likely to lead to a critical review of global supply chains for many companies. Bottlenecks in goods came about due to local lockdowns forcing many companies to shut down production, especially in the first few weeks after the outbreak of the pandemic. Though globalization won’t be reversed completely, it will be critically revisited. Still, the pandemic will trigger a de-globalization, at least in part, combined with more nationally oriented economic and customs policies. The ensuing negative consequences for growth could at least be cushioned by massive corona-driven digitalization efforts, which may contribute to productivity and growth, in this in this difficult environment.

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Despite this clouded growth outlook, equities booked an extremely dynamic recovery following the corona crash. This again underlines their robustness as long-term investments in a zero or low interest rate environment. In addition, a whole series of supporting factors are emerging in the short to medium term. For example, the current positioning of institutional investors across the board is still circumspect, so we expect inflows into equities in the coming quarters as well. In addition, consolidated net income should return to its pre-crisis level more quickly than gross domestic product due to noticeable cost reductions. This will give companies more scope for dividend payments from 2021 onwards. Even the very high valuations on many stock exchanges do not necessarily argue against equity investments. Classic valuation criteria such as the P/E ratio can only be used to a limited extent in the current crisis environment. On the one hand, a reliable profit basis is still absent. On the other hand the historical P/E ratio comparison is misleading due to the prevalent lower interest rates. Empirical studies show that a 0.5%-point lower interest rate level justifies a 1%-point higher P/E ratio.

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