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Goldman Sachs: "You can talk about the downturn as well"

Donough Kilmurray heads the investment strategy department for Goldman Sachs in London. He is responsible for asset consulting for private clients in Europe, the Middle East, Africa and Asia.

TIME ONLINE: In almost every major industrialized country, fears of a downturn are over, including in Germany. What can I do as a private investor in such a situation at all?

Don Kilmurray: Especially as a private investor, it is very difficult to predict when a downturn really comes. While it is important to look at economic trends, investment decisions should not be made dependent on them alone. We also do not believe that now is a phase of recession starts, but global growth is likely to decline. This is reflected in our return expectations. It would be premature, however, to get out of stocks now. Rather, we recommend that private investors diversify their portfolios well and invest in high-quality bonds. Then a portfolio can withstand even large fluctuations. For a recession but missing the typical signs.

TIME ONLINE: Why, we have already seen some harbingers of it?

Kilmurray: At the end of last year, many investors were worried that the US Federal Reserve had raised interest rates for the fourth time in 2018 and yields on US government bonds had risen sharply. These can be signs of overheating in the economy, and so it was interpreted. In our opinion, the worries were exaggerated. Take as an example the employment situation in Europe and the United States, That is very good, but inflation has not risen so far, which is a sign that the business cycle is coming to an end.

TIME ONLINE: Unemployment is low and the demand for labor is rising. This would give workers the opportunity to demand more wages. Why is that rising? inflation but only slowly?

Kilmurray: When the unemployment rate was below four percent in the USA in the nineties and before in the late 1960s, the salaries in the country rose rapidly and with it inflation. This relationship is no longer so direct today. The job market has become much more flexible. Especially in the so-called platform economy, employees have a hard time claiming higher wages.

TIME ONLINE: A downturn can also be caused by other factors that are not necessarily foreseen.

Kilmurray: Of course, an exogenous shock can also lead to a recession. This was the case, for example, when the oil price rose very rapidly in the 1970s. At the moment we have an oversupply of oil on the world market. Political risks such as the trade tensions between the US and China, the situation in North Korea or the Middle East could also intensify. But even here, there are few concrete dangers that would trigger a recession in the short or medium term.

TIME ONLINE: Others fear the still high debts, for example in the USA.

Kilmurray: That's true. Large imbalances in the economy or on the financial markets have also led to a recession in the past. But even if there are more debts in the economy at this time than ten years ago, they have not accumulated so much among consumers and businesses, but especially in countries like China and Japan. In the US, household debts have fallen and corporate debt is at about the same level as before the crisis. But the public debt has risen. However, if a government in the world copes with higher government debt, then that of the US.

TIME ONLINE: Wait a minute, especially when it comes to the US leadership and president Donald Trump goes, many people lose confidence. The government is looking for a conflict with its own institutions and abroad.

Kilmurray: In fact, markets are worried that the White House is putting too much pressure on monetary policy Fed could exercise. After all, it is the most influential central bank in the world. However, a look back at US history shows that even presidents of Donald Trump – such as Truman, Nixon and Reagan – have tried to influence the Fed. They all had only moderate success. It is not uncommon for a US president to levy new trade duties. Other US governments have done the same before.


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