In this way, savers can arm themselves against inflation

IThe Bundesbank expects inflation of at least 7.2 percent on average for the new year 2023. That is slightly less than in the old year – but the savers’ nightmare continues. The inflation rate in Germany is likely to have fallen somewhat in December because the state in Germany is paying the deduction for the gas bill and the statisticians have decided to include this in the inflation calculation.

As early as January, however, the rate should be significantly higher again – albeit probably not in double digits as was the case last time in October and November. In any case, Rewe boss Lionel Souque warns in an interview that consumers must continue to adjust to sharply rising food prices. Inflation may have peaked by now, but in 2023 it will remain a challenge that savers have not known for decades.

There’s a lot at stake: inflation rates, even in the order of 7 percent, make savings in the checking account melt away like snow in the sun.

The whole thing can even become a saver’s trap if the savings interest rates, which have risen again, tempt many to leave more money in the savings account just because the bank no longer charges negative interest rates – and the assets then shrink due to inflation. Negative real interest rates, after accounting for inflation, can be even more treacherous than negative nominal rates.

So what can savers do to protect their wealth from such inflation? Emmerich Müller, CEO of Bankhaus Metzler and responsible for private banking there, has a sobering message for savers: “There is currently no way to park money ‘safely’.”

His advice: “In the current environment of record-low real interest rates, it is advisable to keep an overweight in substance assets, for example in the form of shares,” says Müller. Equities could also temporarily suffer from the extremely high inflation rates. “However, many companies have the opportunity to pass on increasing costs to customers with a slight delay,” emphasizes Müller: “When selecting a stock, it is therefore important to pay more attention to a good market position and pricing power.”

Risk: inflation plus recession

There is one danger: if the economy starts to go down in the new year, as there is much to be said for it, but inflation remains high at the same time, share prices could also go into a tailspin. “In view of the existing risks of recession, investors should focus on companies that are potentially able to survive economic dry spells well,” says Metzler board member Müller. Among the sectors, this applies above all to so-called defensive sectors such as basic consumption and health.

“Once the recession has set in, cyclical stocks can also become more interesting again,” says Müller. History shows that, on average, stock markets begin to rise again four months before the end of the recession: “Economic fluctuations often also offer opportunities, provided they do not escalate into a systemic crisis, which we do not currently expect.”