For how much longer?

Capital Markets Viewpoint by Kai Jordan, Board Member of mwb Wertpapierhandelsbank AG After Friedrich Merz's first 100 days as Chancellor, the public is drawing a very mixed conclusion. His popularity ratings are even worse than those of his predecessor, Scholz. No one expected this. Last week, the inner circle of CDU grandees met for crisis talks. Interestingly, parliamentary group leader Spahn was not present. The veneer between the SPD and CDU was already beyond damaged. The AfD is currently outperforming the CDU in the polls, without the CDU having to do anything to achieve this. Merz has already been able to implement his debt-financed election promises – especially in pension and economic policy. The pension level was fixed at 48% until 2031, and the mothers' pension was improved. A 500 billion euro special fund for infrastructure and climate protection was approved, accompanied by tax relief for companies, including immediate write-offs and a gradual corporate tax cut. In migration policy, family reunification was limited and border controls tightened, which in turn led to disputes with Germany's direct European neighbors. However, real reforms, which Germany urgently needs, are still elusive. The coalition partners have so far been hesitant to tackle them. The so-called active pension is not expected to be finalized until after the summer recess at the earliest. The planned citizen's income reform has also been delayed – a draft bill is not expected until autumn, and implementation could take until 2026. Further structural reforms contributing to the agreed bureaucracy reduction target are non-existent. Criticism comes primarily from the business community. Despite the new investment incentives, growth remains weak – GDP shrank slightly in the second quarter, and leading economists are criticizing the lack of structural reforms. The Ifo business climate index is also stagnating, and consumer confidence remains weak. The rapid loss of public confidence is particularly striking: In current surveys, satisfaction with Merz is only 32%, around ten percentage points less than a month ago. Two-thirds of citizens express dissatisfaction, while trust in Merz's leadership style is significantly lower than that of his predecessors. And that's something that takes some getting used to. Furthermore, intra-coalition disputes – for example, over the appointment of a constitutional court judge – are weighing on the government's performance. Organizations like Transparency Germany are also criticizing the lack of transparency and corruption prevention. The promised political culture of "new seriousness" has so far failed to bring about any visible structural changes. Overall, Friedrich Merz's 100-day record is very mixed. While debt-financed ( https://www.mwbfairtrade.com/de/aktuelles/newsdetail-de/news/kapitalmarkt-standpunkt-von-kai-jordan-vorstand-21/?no_cache=1&tx_news_pi1%5Bcontroller%5D=News&tx_news_pi1%5Baction%5D=detail&cHash=f393257c8bc14bbb83dc87eeb35de22d#c256 ) political promises have certainly been fulfilled, far-reaching reforms and a convincing strategic direction are still lacking. Public sentiment is subdued, and the coalition is under pressure to deliver concrete results after the summer break. In its August 16 issue, the Actien-Börse newspaper already demanded the Chancellor's resignation in writing, and the Handelsblatt also doubts "whether the coalition can still muster the strength for the urgently needed economic reforms." Although everything is supposed to improve after the summer break, Finance Minister Klingbeil spoke out in favor of tax increases to close the budget gap in a summer interview. He wants to focus on taxing high assets and high incomes. This gap is "something where people with high incomes and high assets in particular have to ask themselves: 'What part are we contributing to making this country more just?'" A classic social democratic standpoint – some may see it this way in light of the surging asset prices – but it is unlikely to contribute to peace within the coalition, especially with the CSU. Trump, on the other hand, governs with speed – but success remains uncertain. We have already written quite a bit about the "Big Beautiful Bill" and the "tariff haggling." Trump's influence on independent institutions is also causing criticism: personnel decisions surrounding the US Federal Reserve and public pressure on its interest rate policy are raising doubts about economic stability. EJ Antoni, nominated last week by President Donald Trump to be the next head of the Bureau of Labor Statistics, suggested that the agency suspend its monthly jobs report until it is "corrected." This is a remarkable move, given that the agency's DOGE had made substantial cuts. How long the markets will tolerate the lack of transparency or the upcoming court reporting remains unknown. Economic indicators paint a mixed picture. While the stock market remains stable, job growth is slowing—only 73,000 new jobs were created in July. At the same time, economic growth is weakening, while inflation remains high. In foreign policy, the Janus-faced Trump is trying to score successes with limited ceasefires in Yemen and Ukraine. The delivery of Patriot missiles to Kyiv and new sanctions against Iran signal toughness, but lasting solutions have so far eluded. The so-called summit between Putin and Trump in Alaska is viewed by experts as a disaster. Trump has canceled all those "in the know" and replaced them with personal "buddies" characterized by immense ignorance. Wittkoff had apparently misunderstood everything again during his recent trip to Moscow to prepare for the summit. Anyone who isn't present in Alaska is on the menu for the US and Russia. A pure showpiece for Putin. A Lavrov arriving wearing a CCCP sweatshirt, thus making clear what the goal is: the restoration of the borders of the former USSR. Already, reputable media outlets are describing Trump's actions in Anchorage as "slavishness" and speculating about the reasons. The Russians' possible knowledge of the contents of the Epstein files is explicitly mentioned. That would be more than piquant; it would be nothing short of disastrous. We'll see how the US President behaves in the upcoming negotiations involving the Europeans and Zelensky. And whether he sticks to his promises regarding security guarantees or once again plays the "TACO" (Trump always chickens out). The bottom line is that Trump has implemented some of his promises – particularly regarding taxes, migration, and trade. But what has been the outcome so far? The promised economic recovery is still a long way off. In foreign policy, too, staging and pressure dominate, not diplomacy. He is even more of a TACO than during his first term. Thus, his second term so far stands for determined, yet erratic implementation – with an open outcome and truly measurable success. Meanwhile, the markets largely remain risk-on. Notably for the US, still under the leadership of the Mag7 and AI stocks: Stocks – all-time high House prices – all-time high Bitcoin – all-time high Gold – all-time high Money supply – all-time high National debt – all-time high Inflation at 4% – twice as high as the Fed's target The market nevertheless expects an interest rate cut Fortunately, the oil price is not budging. The reason for this is the uncertainty surrounding the direct or indirect supply situation with Russian oil. Analysts expect continued high volatility, as geopolitical risks surrounding Russia and OPEC+ remain difficult to calculate. The dollar also continues to struggle. Bond markets in Europe and across the Atlantic are also hovering just above their 2023 lows. Investors should keep an eye on this if prices continue to decline. At the same time, expectations of a rate cut by the Federal Reserve are growing. Small- and mid-cap bonds, which promise a decent return above the inflation rate, are also suitable for diversification. However, don't just look at brand names and "hip" sectors, but at the financial figures and the institutions that support them. The summit hardly produced any immediate market reactions, but it did heighten risk awareness. Those seeking to make their portfolios crisis-proof should now focus on diversification and geopolitically resilient sectors. About mwb: mwb fairtrade Wertpapierhandelsbank AG is a securities services provider authorized by the German Federal Financial Supervisory Authority (BaFin) with offices in Gräfelfing near Munich, Hamburg, Hanover, Frankfurt, and Berlin. The company was founded in 1993 and went public in 1999. Today, mwb shares (ISIN DE000A3EYLC7, WKN A3EYLC) are listed on the Munich Stock Exchange in the m:access segment, as well as on the over-the-counter market (OTC) of the Berlin, Düsseldorf, Frankfurt (Basic Board), Hamburg, and Stuttgart stock exchanges. mwb operates in two business areas: Securities Trading and Corporates & Markets. In securities trading, mwb manages over 51,000 order books for German and international securities. These include equities, fixed-income securities, and open-ended investment funds. This makes mwb one of the largest lead brokers in Germany. Contact and further information: mwb Wertpapierhandelsbank AG Kai Jordan Kleine Johannisstrasse 4 D-20457 Hamburg Tel: +49 40-360995-20

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