What Markets and Ronnie Wood Taught Me

Good Morning Ladies and Gentlemen

“It’s Only Rock ‘n’ Roll (But I Like It)”

The Rolling Stones

Financial Times

In a recent opinion piece in The Financial Times, Wei Li provided insight into the significant divergence between bond and stock valuations. “Equity markets are pricing future returns that reflect stronger productivity, corporate earnings that can remain above historical norms, and an economy capable of breaking out of its long-run growth trend. In effect, equity investors are making one of the largest macroeconomic bets in history.” For those unfamiliar, Wei Li is the chief investment strategist at BlackRock, the world’s largest asset manager. As the steward of US$15 trillion in assets, her assertion that “equity investors are making one of the biggest macroeconomic bets ever” deserves attention, after all, the stakes involved in this monumental wager are substantial.

Consensus

In principle, I agree with Wei Li’s view, but it seems to me that this view is already close to the prevailing consensus, at least among a large proportion of the better-educated financial community. While opinions naturally differ in the details, many informed investors appear to share the broad conclusion, making the argument less controversial than it might initially seem and increasingly accepted across the industry.

Markets Reward Foresight, Not Consensus

You know, financial markets serve as a fertile ground for consensus thinking, yet history demonstrates that the most significant investment errors often arise precisely when there is widespread agreement. This consensus fosters a false sense of certainty, leading investors to extrapolate recent trends and disregard alternative possibilities. The issue is further exacerbated by the common tendency to underestimate the complexity inherent in financial markets. These markets are not straightforward, linear systems where causes and effects can be easily pinpointed. Instead, they are adaptive, interconnected networks influenced by myriad participants, feedback loops, shifting incentives, political decisions, and unpredictable human behavior. Even minor developments can trigger disproportionately large consequences, while events that seem significant may leave little lasting impact. Because this complexity is difficult to observe and quantify, investors often replace uncertainty with narratives that seem plausible but can ultimately prove misleading. Consequently, consensus perspectives tend to be most confident precisely when future outcomes are least foreseeable. Thus, successful investing necessitates intellectual humility, independent thought, and a continual recognition of how much remains unknowable.

German Inflation

Now, let’s turn our attention to Germany, quickly. German inflation experienced a slight increase in August, reinforcing the case for another rate hike by the European Central Bank at next month’s meeting. Consumer prices rose by 2.9% year-on-year, up from 2.8% in July, representing the strongest inflation reading since April. Although this figure was below the consensus forecast of 3.1%, it still highlights persistent price pressures within the euro area’s largest economy. Energy costs once again emerged as the primary driver, influenced by ongoing geopolitical uncertainties and the lack of a durable peace agreement in the Middle East, despite multiple peace deal announcements by the U.S. President. On a more positive note, inflation in the services and food sectors showed signs of moderation, suggesting that underlying price dynamics may be gradually easing, even as headline inflation remains elevated.

Germany: Light At The End of The Tunnel?

Is there more inspiring news from Germany? After several years of economic stagnation, signs are emerging that Germany may finally be turning a corner. The latest reading of the Ifo Business Climate Index offers reason for cautious optimism, having risen significantly to 88.8 points in August. This improvement reflects a more favourable assessment of current business conditions and heightened expectations for the upcoming months compared to July. Notably, this marks the fourth consecutive month of increasing business sentiment. Several banks now predict real economic growth of 1% or more for Germany in 2026. Although such a figure may seem modest by historical standards, it signifies meaningful progress after years of tepid expansion. This renewed optimism is largely attributed to a rebound in exports, especially to Germany’s neighbouring European countries, which are its most vital trading partners. The positivity is also reflected in the ZEW Economic Sentiment Index, which indicates that investors and analysts are increasingly confident about Germany’s future. However, the recovery remains delicate; a sustained increase in oil and natural gas prices could once again pressure both households and industries. Still, as our colleagues from Wellenreiter point out, technical analysis indicates a possible bottoming out. While challenges persist, a tentative economic upturn appears increasingly visible on the horizon. Maybe we should look at broader-based PMI numbers next week.

Ron Wood

Anyway, besides financial markets, I had the chance to attend an intimate concert with Ronnie Wood in Zürich this week, with 1’600 spectators. He left a profound impression on me. Here is a man, now 79 years old and with a fortune of around USD 200 million, who has triumphed over significant drug and alcohol challenges in his life. Yet he arrives right on schedule, performing and singing for over two hours with unwavering energy and palpable joy in the music. Nothing about his performance feels routine or taken for granted. Instead, he radiates remarkable humility, professionalism, and dedication. What stood out to me particularly was the warmth and gratitude he expressed as he bid farewell to the audience at the concert’s conclusion. With a beaming smile and an enthusiastic “See you next time,” he demonstrated a level of appreciation that is increasingly rare these days. His positive attitude, courtesy, and evident work ethic that evening left a lasting impression on me.

Conclusion

In conclusion, one of the most significant lessons learned this week goes beyond inflation, Germany’s economic outlook, or even the valuation discrepancies between bonds and equities. It serves as a reminder that certainty is often an illusion. Financial markets operate as complex systems in which consensus views can seem persuasive until they are proven incorrect. While optimism surrounding productivity gains, technological advancements, and economic resilience may ultimately be warranted, investors must remain aware that the future rarely unfolds as anticipated. Embracing humility, maintaining independent thinking, and having the courage to challenge conventional narratives are among the most crucial disciplines in investing. Furthermore, Ronnie Wood’s performance delivered a different yet equally important lesson. Success, whether in music, business, or investing, is seldom the result of talent alone. It is fueled by discipline, gratitude, professionalism, and the ability to consistently show up with enthusiasm, even after decades of accomplishment.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
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9494 Schaan/Liechtenstein
Mail: smk@incrementum.li