The CIO of asset manager DWS (formerly Deutsche Asset Management) has dismissed the risks of a “no deal” Brexit as a hypothetical question.
Speaking at a press briefing, Stefan Kreuzkamp said he believed that there will be a deal between the UK and the European Union over the UK’s exit terms next March, and added that he could not answer a hypothetical question on the risks arising if there was no deal. Although most experts believe there will be a deal, not least due to the potential economic damage from a hard or disorderly Brexit, the EU is understood to be increasing its preparations for no deal, while Brexit hardliners are urging the UK government to be willing to walk away from what they see as a bad deal.
Commenting on the global outlook, Kreuzkamp said the markets are now in the late cycle of a long bull market, following nine years of global growth, low inflation and expansionary monetary policy. He added that the global financial crisis, 10 years ago, has reduced GDP per capita and this has led to increasing populism and political risk. As an example, Kreuzkamp said that GDP per capita in Germany is €2,700 below trend, compared to €49,800 for Italy. “Germany is comparatively well off and it is one reason why Italian voters are fed up.” He pointed out that there is a clear relationship between lost GDP per capita and the share of vote gained by populist parties, with the latter reaching over 50% in Italy and Greece, the biggest losers in GDP per capita.
DWS expects the European Central Bank to start raising interest rates in late 2019, for the first time since 2011, but said there will be not a recession in 2019, although volatility will increase.