Postponed is not abandoned

Bond yields were up last Friday, whereas equities recorded losses. Signs that the bull market with low volatility, which started after the Brexit vote, is drawing to an end are becoming more plentiful.

ECB assuming wait-and-see stance
The immediate reason for the losses was the fact that the president of the European Central Bank failed to indicate any further loosening of the monetary policy at last Thursday’s press conference. The most recent measures taken in spring are in fact TOO recent for the effects on the economic activity and inflation to be sufficiently assessable. The projections of the ECB for real economic growth were revised downwards by only a minor degree. Growth rates of 1.7% for 2016 and 1.6% for 2017 are in line with the continuation of moderate yet constant growth. Also, while the risks are rather on the downside, they have not increased.

Inflation the decisive factor
The development of inflation is the decisive factor. The ECB expects a gradual rise of inflation (this year: 0.2%; 2017: 1.2%; 2018: 1.6%). If this development continues “not to come through”, a monetary loosening is very likely.

Options evaluated
President Draghi hinted at further loosening at the press conference. The ECB Council has tasked committees with the evaluation of the options for a smooth implementation of the purchase programmes. They would become particularly relevant if the purchase programmes, which are due to expire at the end of March 2017, were to be extended.

Wait until December
Council member Ilmārs Rimšēvičs pointed out last Friday that the ECB was evaluating all three options for a change to the purchase programmes: change in volume, change in allocation, and change of minimum yield. But he also said that we would probably have to wait until December for a decision.

Events of this week
Until then, some events coming up this week hold the potential to cause elevated volatility. On Tuesday, a further weakening of the Chinese economic data for August (industrial production and investments) would trigger a renewed sense of worry with regard to the stability of growth. On Thursday, the central bank of the UK might disappoint the markets by reducing the likelihood of further monetary loosening. On Friday an acceleration of US inflation in August would cause the expectations of a rate hike to rise. And lastly, the only result of the informal conference of the 27 heads of state and governments (EU without UK) in Bratislava on Friday might be that no consensus for the future development of the EU has been reached.

 

 

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.

The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website www.erste-am.com under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website www.erste-am.com. A summary of the investor rights is available in German and English on the website www.erste-am.com/investor-rights and can also be obtained from the Management Company.

The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.

Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at www.erste-am.com.

N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated. Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance.

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to § 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens.

It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.

Erste Asset Management GmbH is affiliated with the referring Sparkassen banks and Erste Bank.

Please also read the “Information about us and our securities services” published by your bank.

Subject to misprints and errors.