Permanently negative real interest rate calls for investments in securities

Germany’s Savings Banks do not expect additional interest rate hikes by the ECB in the foreseeable future. “In our view, however, capital market interest rates will remain below inflation rates for a long time. This is tantamount to negative real interest rates. Purchasing power can best be maintained by widely diversified investments in securities,” said Helmut Schleweis, the President of the German Savings Banks Association (DSGV) at the DSGV’s press conference on the occasion of the Annual Meetings of the International Monetary Fund and the World Bank in Marrakech (Morocco). 

Schleweis criticised the public’s fixation on overnight deposits. “Overnight deposits lag behind inflation. This is not a good investment recommendation,” said the President of the German Savings Banks Association. Investors should take a long-term view and be prepared to endure short fluctuations in value. In the immediate future, equity markets would probably move sideways with high volatility. Schleweis firmly believed that, in the medium term, equity markets would once again benefit from global growth and the transformation of the economy towards digitalisation and sustainability.  

The new world of inflation and higher interest rates, the volatility in the capital markets and the phenomenon of negative real interest rates made good advice imperative for broad segments of the population. Savings Banks were therefore also striving to prevent any new hurdles from being created for retail investors seeking advice. “Advice must remain free of charge even if no deal is concluded.” And it was also a benefit if advice given to retail investors was co-financed in a spirit of solidarity by volume-based commissions. In view of their responsibility for promoting asset formation among broad segments of the population, Savings Banks would continue to uphold this system.