Deutsche Asset & Wealth Management (Deutsche AWM) today offered its assessment of the central banking situation and its key forecasts for the month of August.

According to the CIO View report of Deutsche AWM, which has operated in Luxembourg for over forty years, the recent crises in Greece and China, as well as the normalisation of the monetary policy in the United States, have demonstrated the limited power of central banks. Asoka Wöhrmann, Chief Investment Officer of Deutsche AWM and Member of the Deutsche AWM Executive Committee, stated that "high debt levels and volatility are a dangerous mix", citing the examples of crisis-ridden Greece, the Chinese stock market and the potential rate hike of the U.S. Federal Reserve Board (Fed).

According to Wöhrmann, many politicians are well aware of the need to initiate structural reforms in the deregulations of product and labour markets and to promote entrepreneurship and innovation, claiming that the political world must act now. This will then support the growth that, in turn, will open up opportunities for a more restrictive monetary policy. In this way, claimed Wöhrmann, it would be possible to faster curb harmful credit growth.

In addition, the report stated nine recommendations and outcomes it expected to see in the coming August. These were that central bankers would warn against overheated markets; the U.S. central bank would hike rates in September; bond yields would slightly recover; markets would prove resilient to the Greek crisis; stoicism and long-term confidence in China; an agreement with Iran would add pressure to oil prices; trading ranges would be key, urging actors to buy at the bottom and sell at the top; cash would be useful with actors encouraged to be prepared for opportunities to buy; and Deutsche AWM would perform an asset allocation of its balanced model portfolio.

These forecasts followed State Street Global Exchange's findings released yesterday which reported that investor confidence had declined by 12.5 points to 114.6, due to the recent global crises outlined by Deutsche AWM.

 

Photo by Deustche AWM