Are interest rates and bonds now the means to an end? December 2025 – a few days ago, the Federal Reserve, the US central bank, decided on its next interest rate cut.
December 2025 – A few days ago, the Federal Reserve, the US central bank, decided on its next interest rate cut. Political pressure in the US is enormous, and the prospect of finding a truly new anchor of stability when the Fed’s top job is filled next spring is slim. The incredible debt of the US budget must continue to be financed. So interest rates must be lowered further, or the POTUS must tap into new sources of revenue. Otherwise, the financial markets will demand higher interest rates in the medium term to finance the budget deficit. As a percentage of GDP, the US is currently at about twice the level we are still seeing in Germany. France and Italy have debt levels similar to those of the US. And Japan, which is currently being celebrated as a high-flyer on the stock markets, has obviously now managed to turn the corner with a debt level about four times that of Germany. So is government debt not important?
Well, Germany is doing everything it can to close the gap with France and Italy. €500 billion in special funds for infrastructure and several hundred billion more for defense are to be made available in the coming years as government investment. Is that really the case? We all know from our business studies what investments are in real life and what they are supposed to be used for—growth in production capacity, increases in productivity, improvements in energy efficiency, and the development of new markets. For politicians, however, investment means above all more staff = more bureaucracy, more consultants, more regulations, and a huge portion of the remaining funds will certainly be eaten up by sharply rising prices. The political boom in infrastructure and armaments is naturally having a strong upward effect on prices. So what now – invest in interest-bearing securities/bonds and defense stocks?
We are keeping a low profile. A significant portion of our investments remains in vested pension entitlements and real estate. The rest continues to be broadly diversified across global, European, and German ETFs, emerging markets, infrastructure, and still also in the automotive sector. When these crazy amounts of money flood the markets, it will go some way toward reassuring people in our country and bringing back private consumer demand. Stay brave, but don’t get greedy!
We wish you a relaxing holiday season and a healthy and successful 2026.
