New equity culture in Germany?

The figures recently published by the Bundesbank on the formation of financial assets are likely to surprise even experts: in the first quarter of the current year, German citizens invested a net 13.8 billion euros in shares and similar equity securities and another 7.1 billion euros in investment funds. And this despite the fact that the corona pandemic triggered historic price slumps on the stock markets. Towards the end of the winter quarter, for example, the DAX plummeted by almost 39 percent in just four weeks.
Private households in Germany are traditionally considered to be rather risk-averse. Their financial assets consist primarily of bank deposits and life insurance policies. And in other crises, such as the recent financial market crisis, they have reacted to price slumps, sometimes in panic, by selling securities. There are certainly several reasons why things look different this time: For example, the financial market crisis not only caused a loss of economic optimism, but also destroyed confidence in the financial markets and their players. Added to this is the enormous investment backlog that had built up as a result of the long period of extremely low interest rates, without any sustainable turnaround in interest rates being foreseeable to date. On the contrary, the central banks‘ corona-based monetary policy is likely to prolong the low interest rate phase.
Nevertheless, it is surprising that the great flight from equities did not materialise this time and some of the price slumps were even used to buy shares and funds. After all, the fear of economic damage was and still is particularly great in Europe shortly after the outbreak of the pandemic. But to immediately identify a new equity culture in Germany is certainly exaggerated and premature. For example, the Bundesbank’s figures on financial asset accumulation are still considered provisional and are often corrected later. Moreover, equity exposure is probably limited to a small proportion of private households. Added to this is the Wirecard scandal, which has probably damaged the equity culture in Germany. Nevertheless, the latest figures on financial asset accumulation make private households optimistic and open up prospects for reducing the investment backlog.

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