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The Opportunities of Low Interest Rates

Frankfurt, 28 June 2019 – Germany's public debt fell by 1.1 percent year-on-year in the first quarter of 2019 to 1,927.2 billion euros. This was reported by the Federal Statistical Office (Destatis) on Thursday. At the same time, the cabinet draft for the federal budget 2020 adopted on Wednesday foresees a further reduction of the debt ratio from 59 percent of gross domestic product (GDP) in the current year to 51 percent in 2023. According to Patrick Vogel, one of the fund managers of the MainFirst Absolute Return Multi Asset, now is not the time to save. "The continued low interest rates present an ideal opportunity to help the country achieve higher long-term growth through targeted fiscal policy, economic stimulus programs and structural reforms," Vogel said. At minus 32 basis points, the 10-year German government bond yield is at a historic low. Austria has already used the low interest rate environment to issue 100-year bonds. Germany should also take advantage of the low refinancing costs. "In this interest rate environment, investing in future growth makes particular sense," emphasises the investment expert.

Solutions from the Far East: Targeted investment and reforms
Germany can learn from Japan. "Japan has a lot in common with Germany. Let's take demographic trends alone: the population has been declining for 20 years," says fund manager Vogel. Nevertheless, Nippon has achieved an increase in GDP per capita since the bursting of the real estate bubble in 1990. "Japan has achieved this through a unique combination in which monetary and fiscal policy as well as structural reforms are mutually supportive." Austria is already moving in the right direction. The AA-rated bonds with a maturity of 100 years were offered anew and quickly bought up by the market. "This enables Austria to finance necessary investments," explains the fund manager. Germany should take heed and strive for systematic reforms and economic stimulus programmes - instead of for a black zero. "If Germany does not want to be left behind by new technologies such as big data and artificial intelligence, now is the time to invest," Vogel emphasises.

Germany must now set the course for the future
Areas such as big data coupled with artificial intelligence will continue to grow strongly in the coming years. Patrick Vogel is strategically focusing on solid investments with strong long-term growth. "Such structural trends offer high growth potential and, given a successful stock selection - which requires appropriate expertise - attractive returns can be achieved both with bonds and equities," says Vogel. The amount of data is constantly increasing and can generate high profits for the owner. Many companies generate both growth and innovative business areas. "Most people only know the Nasdaq as an index, but don't realize that there is an enterprise with an attractive business model behind it, which feeds on the huge amounts of data that grow out of the many transactions that take place via the platform. Amazon and Alibaba also use the central role of data in a variety of ways. One of their fastest growing businesses is storing data in the cloud. And data is also an important area of application for artificial intelligence. "AI is a trend that will grow strongly in the coming years and Germany should define such a trend as a key industry," says the fund manager.