Dhe valuation of the stock markets is currently an important topic. Also for Reinhard Panse, co-founder and chief investment strategist of the Finvia family office, who sees high expectations priced in. Corporate profits should return to pre-crisis levels as quickly as possible. “Otherwise, the American stock market in particular is massively overvalued,” he says. “The price / cash flow ratio there is currently 21, even during the technology bubble 1999/2000 this value was not quite reached. Even when the Nikkei index reached 40,000 points in 1989, the ratio was only 19. “Panse did not choose the comparison with Japan by chance. Back then, the corporate world turned just as much to Japan as it does today to the United States. Japanese management methods were considered exemplary, and it was believed that high technology could only come from the land of the rising sun in the future. Today, American technology companies have similarly excellent market positions. “The only catch is that they already have this worldwide. In this respect, the high rating explains the previous growth, not the future, ”says Panse.
In addition, the companies benefited from a comparatively low tax burden. America’s new President Joe Biden, however, needs money to finance corona aid, so that the tax burden for technology companies could rise relatively more. “But if technology companies are more heavily burdened, the profit decline on the American stock market can reach more than 10 percent.” On top of that, companies with monopoly positions tend to neglect innovations and instead turn the price screw. Panse believes technology users’ stocks could do better going forward. That speaks for low-valued companies in emerging markets and Europe. Panse cites the Hornbach hardware store chain as an example. Due to high investments in the online business, this has recorded a weak profit development in the past few years. In the Corona crisis, however, this benefited her and the share price rose from 40 to 90 euros. The situation is not unlike the year 2000: “The Internet has developed well since then, the ratings of Internet companies were simply too high at the time.”
More difficult budget situation than after the world war
In the long term, however, Panse are primarily concerned with national debt. The valuation of shares is also dependent on interest rates. One also looks at the price-cash flow ratio, not only because the inflow of funds is less manipulable than reported profits, but also because the interest rate trend determines this statistically at 88 percent. According to the historical connections between government bond yields and stock valuations, the American stock market is betting on rising profits, which must come, in contrast, there is still air in Japan and Europe.