Jens Ehrhardt (DJE): ‘I don't expect a bear market, although the best time of the year is probably behind us’.

When the COVID-19 pandemic broke out, Jens Ehrhardt predicted a DAX level of 16,000 points by spring 2021. Did the famous German manager have a crystal ball? No, and in fact I am no friend of fixed price targets. However, in this case we had such an extraordinary monetary and fiscal situation that I felt we had to do it. Because, never before, have I experienced the economy being stimulated so strongly, especially from a monetary point of view,’ he says.

In the opinion of the manager of DJE Kapital, a firm in Spain represented by Altment Capital Partners, when you suddenly print a lot of money, it has immediate effects, especially on the stock markets. That is why he boldly set this target, which at the time was very optimistic and has ended up becoming a reality. But what about now, what is going to happen and where do we stand in the coming months?

‘I don't expect a bear market, although the best time of the year is probably behind us. Many investors are already invested, fund managers' cash holdings are only 3.9%. So a short term correction is possible. In the medium term, however, we are likely to see an uptrend, albeit a flatter one, with fiscal policy providing more tailwind,’ he reveals.

The manager of DJE Kapital, which has two FundsPeople Seal 2021 funds, both rated Consistent (the DJE Mittelstand & Innovation and the DJE Zins & Dividende), expects Europe to continue to rely on fiscal stimulus. ‘After all, too much fiscal restraint has not worked in the past,’ he reminds us.

But what is the danger that we could see a stronger correction in the stock market? In his view, that would be possible if central banks start to tighten sharply. But after the Fed's recent discussions, the manager believes they have realised that a U-turn in monetary policy could hurt the economy and the stock market, so they will be very cautious. ‘Of course, investors are already heavily invested, optimism is high, especially in the options market, but in my view there is not yet a clear bottom for a true bear market,’ he says.

Momentum of active management
Although it sounds like a pro-domo argument, Ehrhardt believes it has been clear for some time that active fund managers have been outperforming index-based solutions such as ETFs. ‘In May, for example, active managers outperformed the index by 70%,’ he notes. Why is this?

‘Last year we saw that initially a very small number of large US technology stocks pushed the index up. Active managers can normally only invest a limited part of the fund's assets in individual stocks. Therefore, they could not keep up. However, from November onwards, the rise was widespread. This created numerous opportunities for active management, e.g. from a technical or valuation point of view, while passive investors invested mainly in a few index heavyweights. I think stock pickers will be able to take advantage of their opportunities and make some profits as the year progresses,’ he concludes.