Daniel Becker, Division COO Finance
© Daniel Becker
The “Commerzbank Business Forum Markets 2024,” held before the Easter holidays in the Allianz Arena's event space in Munich, served as a pivotal platform for industry professionals to discuss and analyze economic trends and forecasts.
The forum commenced with remarks from Johann Kraemer, head of Financial Markets Sales, highlighting the growing impact of geopolitical dynamics on financial markets, setting the tone for a day of insightful deliberations.
The forum’s agenda was marked by several notable presentations, including a key note by Dr. Jörg Krämer, Chief Economist, who provided an in-depth economic outlook for 2024. The discussion spanned a range of critical topics:
- US Economy: Not even a mild recession
- Euro Economy: A false recovery in the Eurozone
- Inflation: The beast is not tamed
- ECB: No classic cycle of interest rate cuts ahead
- Financial Markets: The opportunities outweigh
Outlook on US and European economies
The outlook for the US economy was very positive, mainly attributed to a recovering US real estate market, banks easing credit restrictions, and a fiscal policy leaning towards relaxation, not to mention expected rate cuts. However, the relative level of US national debt is concerning, reminiscent of the dark times during and shortly after WWII.
The overall outlook for the Eurozone is significantly gloomier, not least because of the sharply risen consumer prices, high taxes, and significantly higher energy prices than in the USA, for well-known reasons. Still, there is a glimmer of hope from 3Q24 onwards, but it's far from any potential euphoria.
The fight against inflation was aptly described as a marathon. There are concerns whether the ECB can sustain this marathon or starts cutting interest rates too early or too aggressively. A false sense of relaxation in recent months could be misleading. High and rising unit labor costs stand out as an indicator of an overly positive interpretation of inflation data.
A somewhat more positive outlook was given to the stock markets. Although valuations are high, they are far from a bubble, and the AI trend is considered sustainable, even compared to the industrial development through electrification in the late 19th century.
Notably, the conference underscored the importance of incorporating geopolitical insights into financial strategies, a point driven home by the acknowledgment that most economic forecasts traditionally do not factor in the potential for geopolitical conflicts.
Outlook on currency risk
Ulrich Leuchtmann, head of Commerzbank’s Currency Research, offered a perspective on currency trends for 2024.
The trade-weighted exchange rate of the € reached a new all-time high in 2023. Unlike the previous high in 2008, this is less harmful to exports because our competitiveness compared to other countries has increased by 15%. This is because inflation in these countries has been significantly higher than in the Eurozone since 2010.
There was a short-term slightly positive outlook for EUR/USD because the ECB traditionally reacts more sluggishly than the FED. However, this behavior might strengthen the USD in the long run, especially since the development of the real GDP for the USA and Canada is expected to be much more positive than for the rest of the G7.
In currencies, too, we see predominantly “rigid” assumptions based on historically grounded mechanisms, especially without considering geopolitical special effects.
Ecomomies are made for peace times
All economic forecasts assume peacetime in the G-7 countries and the major economies dependent on them. It was gratefully admitted that classic economic forecasting is not at all designed to account for the likelihood of wars. This highlights the unique added value of geopolitical data as 21strategies incorporates them into their hedge21 Financial Markets AI policies.
The forum not only provided a platform for the dissemination of key economic insights but also facilitated meaningful exchanges, such as the conversation with Ulrich Leuchtmann, who expressed enthusiasm for the innovative approache of 21strategies, especially in the realm of AI-powered and geopolitically sensitive financial strategies. 21strategies is active in financial markets, specifically in AI-controlled currency exposure management for Corporate Treasuries, with the unique selling point of “AI-powered and geopolitically sensitive policies."
About 21strategies
21strategies was founded by Prof. Yvonne Hofstetter, Dr. Christian Brandlhuber and Dr. Scott Muller in 2020 and is based in Hallbergmoos, Bavaria, Germany. The company transforms how organizations make strategic and tactical decisions under uncertainty. To aim at their mission, 21strategies provides Third Wave AI. Solutions for the civilian sector include hedge21® for hedging foreign exchange exposure and commodity price risk, and the Defense Metaverse for the defense sector. Both solutions are based on 21strategies’ proprietary AI technology tactics21.
