Andreas Gruber, Chief Investment Officer at Allianz Investment Management
Why have the stock markets been in a state of emergency for a few weeks now?
China definitely pulled the trigger as far as the erratic price swings are concerned, although it was definitely a case of several factors coming together. Nevertheless, I can't draw any parallels with the global financial crisis of 2008. The 2008 crisis was a crisis of trust, a liquidity crisis. Today's situation is entirely different. The current turbulence is part and parcel of a healthy correction. After a steady increase in stock market prices over the past three years, it was high time for an adjustment. We knew that it was on the cards. The herd mentality plays a key role on the stock markets. It results in price distortions in both directions. At some point, the markets end up losing sight of the fundamental value. This is exactly what happened in China. Stock market prices in China more than doubled in the space of a year with economic growth of seven percent. Why should prices double? The trend was completely exaggerated and things have now returned to normal. We see the price correction as a healthy development.
So what do you think will happen next?
This sort of price slump is something that happens every five to ten years or so. It certainly doesn't unsettle me. While we're bound to see prices remain volatile over the next few weeks, I don't expect to see another crash. Although the FED's September meeting could upset the markets again, the latest movement has already anticipated a lot of the potential impact. The stock markets are then expected to reach a level from which they can start heading north again in the long term. And that's the only thing that counts for us as a long-term investor: the long-term trend.
What conclusions have you drawn from the developments on the stock markets?
We have broadly diversified, long-term investments. This means that we don't have to take any action in response to the current developments on the stock markets. We have not been forced to resort to distress sales - instead, we are on the look-out for entry opportunities. Short-term fluctuations like the ones we've been witnessing of late - no matter how severe they are - are pretty much irrelevant from our point of view. They do not have any implications for our customers either. It's important not to lose your head. Incidentally, private investors should also be looking to maintain this sort of long-term focus.