DJ Kapital, a German investment fund manager, began operating in Spain in March 2019 using the FMM approach. Created by founder Jens Ehrhardt, FMM centers on three pillars: fundamentals, markets, and money flows. Fundamentals assess how the business activity in the world’s largest economies is evolving; markets track momentum, trend, and direction in equities; and money flows consider the amount of capital ready to move into stocks. The firm manages a substantial portfolio, with 17 billion euros under management, and its best-known fund is the DJE Zins & Dividende, a balanced offering that emphasizes income alongside potential growth.
What is their view on the macroeconomic situation following the recent rate cuts by the European Central Bank? They maintain a positive outlook for the global economy. The United States remains the cornerstone, anchored by the American consumer who contributes about seventy percent of US GDP. Monitoring US consumer activity is essential for anticipating future moves across equities, fixed income, and high-yield bonds. The euro area economy, while softer than the US, shows improvement when compared with six or twelve months ago. Strengths are evident in southern Europe’s tourism sector, early signs of revival in Germany, and a more favorable European trajectory than a year ago.
Beyond that, India stands out as a leading performing economy in recent years with expectations of continued solid growth. China remains a key unknown, particularly in relation to its handling of the real estate downturn. Yet growth near five percent could still be feasible, and opportunities may emerge in China’s equity market, even if they are not easy to tap.
In response to the question, rate cuts are not deemed immediately necessary. Inflation remains elevated in both the US and the euro area, so policy should be driven by data, and rapid rate reductions are unlikely. Even if growth slows, this cycle of rate cuts and potential ECB actions later in the year could provide stimulus for the euro area and, by extension, the global economy.
Are concerns rising about inflation in the eurozone? Structural forces suggest inflation will stay above the levels seen in 2019. The main driver remains wage growth in recent years, but inflationary pressures appear across many developed economies, encapsulated by three D-like dynamics. First, demographics: aging populations in the US, Europe, Japan, and China reduce the labor pool and push wages higher.
Second, deglobalization. The shift toward protectionism and relocalizing supply chains means higher costs to maintain a second supply line. Companies still produce in China but seek an additional, localized chain as a safeguard. This upfront investment translates into higher prices over time.
Third, decarbonization. The global push for rapid emissions reductions requires large-scale investments in new supply chains and power generation. This is costly and will show up in consumer prices and in the goods people buy, given energy-intensive transport and manufacturing. Energy prices therefore influence many facets of daily life.
And perhaps another factor would be debt. Japan has carried a long-standing debt challenge, while the US and the euro area, especially France and Italy, carry higher leverage. With higher rates, servicing this debt becomes more expensive, feeding into corporate costs and higher prices.
What are their expectations for US elections? US elections carry substantial importance for the global economy and geopolitics. Polling indicates Donald Trump leading nationally and in several key states. The team believes a high likelihood of another Trump presidency exists, though legal issues continue. This scenario would shape foreign policy, China, Mexico, Europe, NATO, and tariffs. From a European perspective, a Biden administration might be more favorable for economic policy given evolving deficits. If Trump returns, tax cuts could reappear, similar to 2016. In either case, fiscal policy is unlikely to swing dramatically in a single direction in January 2025, influencing market expectations.
And how do they view European election results? The move to the right had been anticipated. Compared with earlier elections dominated by green policies, recent results emphasize migration policy. France’s early elections stood out, echoing events in the United Kingdom. This year is busy with elections in India, the US, and Europe. Yet markets have largely ignored these political shifts, focusing more on external policy than on fiscal matters.
What is their view of Spain’s economy? The key drivers are inflation dynamics and how the ECB views inflation across individual countries, not just the euro area as a whole. In Spain, inflation has risen to around 3.6 percent. With rate cuts, bringing this level down remains a challenge. Overall, southern European countries benefit from tourism and a weaker euro. Spain, in particular, appears on a healthy trajectory, though elevated inflation will pose challenges as ECB cuts take effect.
Where do they see opportunities in equities? Currently, the largest exposure in equities is to technology. Valuations remain a consideration, but solid earnings growth, high margins, and abundant cash flow offset these concerns. Technology continues to be a structural driver of organic growth for the group. The financial sector, including banks and insurers, benefits from higher rates. Insurance companies, in particular, are raising premiums to offset inflation while investing new premiums to generate strong returns.
And in fixed income? The US dollar curve looks attractive right now. When investing in euros, higher US rates help achieve a yield carry. Currency risk matters, and the euro has benefited from this dynamic. In terms of risk, the focus is on sovereign duration versus credit risk. Corporate bonds are preferred, with a three-to-five-year window seen as a comfortable horizon to assess issuers.
What is DJ Kapital’s investment philosophy? They describe themselves as highly active managers who reject the idea that capital markets are always efficient or that consensus about fundamental data remains correct over time. This approach allows value to be added through both asset allocation and stock selection.
Are they contrarian investors? They pursue tactical contrarianism but not as a defining trait. Some argue that true contrarianism is about being right, not just going against the crowd. If the consensus is correct, they want to be part of it; if not, they are comfortable deviating. They do not chase benchmarks or competitors; they pursue their own path. If that means contrarian, so be it; if it aligns with consensus, that works too.