Inflation: how to react to price changes. Dynamics of past years and current realities
The last time there was such rapid inflation as it is today was around three decades ago - as a result of reunification. Many companies are raising their prices to offset lockdown losses. At the same time, there is a consumption congestion due to the months-long corona restrictions.
However, the sudden demand meets a reduced supply because raw material companies and intermediate product manufacturers reduced their capacities during the Corona crisis. Long waiting times for consumer goods and higher prices are the result.
What does this mean for the investment?
With an inflation rate of four percent, from a credit balance of 50,000 euros, only around 46,200 euros are left after two years - measured by purchasing power. Anyone who does not care about their savings for five years can only buy goods for around 41,100 euros afterwards. After a decade, purchasing power has even shrunk by a whopping 33 percent.
"Inflation is one of the most underestimated phenomena because many savers only take note of the nominal figures, which do not change," says Haspa expert Schimmer.
There was inflation before - what is different now?
Savers shouldn't trust that higher consumer prices will lead to higher interest rates again. "The policy of the central banks has meant that the interest rate no longer adjusts to the inflationary environment," says Schimmer.
The bottom line is that the saver makes losses and has a negative real interest rate. 10,000 euros invested for two years at an interest rate of 0.51 percent (Crédit Agricole) leads to an annual real negative interest rate of 3.29 percent - after deducting the current inflation rate.
What are the alternatives?
There are no real alternatives for money that should be available at any time or that is needed again in two or three years. However, savers should check whether they really have to park the money in this form of investment to the extent that they have up to now.
What do experts expect?
"By the end of 2021, the German inflation rate could even climb to over four percent, because the recovery from the Corona crisis will lead to price increases, especially for some services in the coming months," says Michael Holstein, chief economist at DZ Bank. Most economists are still assuming that the inflation rate will level off again between two and three percent next year. But whether this will really happen is uncertain.
An interest rate hike as a braking maneuver is not to be expected from the European Central Bank (ECB). "Further rising prices are not our preferred scenario for next year, but all the ingredients for sustainably rising prices are in the current phase," says Bernd Schimmer, securities strategist at Hamburger Sparkasse (HaspaCommerzbank chief economist Jörg Krämer assumes that alone the cost of transformation to a carbon-free economy means “an inflation rate that is about 0.5 percentage point higher on average” by the end of the decade.
What kind of investment can you beat inflation?
Stocks bring an average annual return of between five and eight percent. "Inflation takes place in a good economic environment," says Schimmer. "You can assume that companies can adjust their prices, so sales and profits should increase." He favors sectors such as automotive, chemical, industrial and consumer goods.
Torsten Johannsen from the private bank Otto M. Schröder advises companies that have pricing power and refers to stocks such as Nestlé, Kraft Heinz or Unilever, which are also reliable dividend payers. Those who shy away from the selection of individual stocks can also invest in an exchange-traded index fund. The best known is the MSCI World Index with 1,600 stocks.
Since the stock market has been very successful for a long time, it can also be worthwhile to look at stocks that have lagged behind so far. So-called value stocks stand for companies that are valued particularly low on the capital market. Finding them is not easy.