DWS Expert: One to Two Fed Rate Hikes Manageable for Investors, Equity Repositioning Required

DWS fund manager Benjardin Gärtner told the Handelsblatt Invest podcast that one to two more US Federal Reserve rate hikes remain manageable for diversified investors, though he acknowledged the tightening cycle is forcing a fundamental reassessment of equity-bond allocation ratios. The discussion centers on how far the Fed can push rates before the equity risk premium erodes to levels that justify rotating toward fixed income as a credible alternative for long-term institutional portfolios.

German and European institutional investors are particularly exposed to this recalibration because their liabilities are often denominated in euros while their asset allocations include significant US equity and credit exposure. As US yields approach 5%, the carry cost of maintaining unhedged US equity positions rises, and the attractiveness of higher-yielding, lower-volatility US Treasuries grows as a competitor for portfolio capital that was previously forced into risk assets by the zero-rate environment.

Watch European asset manager rebalancing data and fund flow statistics for evidence of a rotation from US equities into short-duration Treasuries as Gärtner's 'manageable' threshold of one to two hikes approaches. The decisive variable is the ECB's own rate path — if the ECB accelerates hikes in parallel with the Fed, European institutional investors face rising pressure on both sides of their balance sheets.

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