German Middle Class Sees Notable Wealth Accumulation, But Gaps Persist Across Age Groups

Economic

Summary:

A recent study by the German Economic Institute (IW) reveals that household wealth in Germany has increased substantially, especially among older demographics...

Wealth Grows with Age: The Intergenerational Divide

According to the study, based on Deutsche Bundesbank data, the median net worth of German households stood at €103,100 in 2023. This median figure unlike the mean provides a more balanced view by mitigating the effect of extreme wealth at the top. The top 10% of households, for instance, reported a median wealth of €777,200, underscoring the level of concentration at the upper end of the spectrum.

A striking trend emerged when breaking the data down by age. Households under 35 held a median net worth of just €17,300, in stark contrast to the €241,100 held by those aged 55–64 the wealthiest age bracket. The reason for this gap is clear: wealth accumulation takes time, and many young people are still in the early stages of their careers or burdened with educational loans. Notably, even those over 75 maintained a relatively high median net worth of €172,500, suggesting that asset preservation among the elderly remains robust.

Assets, Not Income, Drive Wealth

The study, based on a survey of around 4,000 private households, analyzed net wealth, which includes all assets (real estate, financial holdings, valuables, vehicles, business assets) minus debts. It confirmed that homeownership plays a critical role in building long-term wealth. Fewer than 10% of Germans under 35 own property, while more than 50% of those aged 55–64 do. This trend not only reflects the financial constraints of young adults but also the compounding benefits of long-term homeownership.

Maximilian Stockhausen, a co-author of the study, emphasized that if the German government wants to promote private wealth accumulation, it should reduce the tax burden on earned income. Allowing workers to retain more of their take-home pay would improve their ability to save and invest.

A Wealthy Nation, But Unevenly So

While Germany’s middle class has shown substantial asset growth, the data highlights a clear generational wealth divide. Older households continue to consolidate wealth, often via property ownership and long-term financial planning. Meanwhile, younger Germans are struggling to accumulate assets at the same pace, limited by lower starting capital and limited access to real estate.

As debates over intergenerational fairness, housing affordability, and tax reforms continue in Germany, the study provides vital insights into how wealth is built and who is being left behind.

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Economic

Dimon: Market Too Complacent on Fed Policy

In a stark warning to investors, Jamie Dimon, the long-serving CEO of JPMorgan Chase, emphasized that the risk of the U.S. Federal Reserve raising interest rates remains underappreciated by financial markets. While current forecasts suggest only a 20% probability of further rate hikes, Dimon estimates the chance to be nearly double between 40% and 50%. He described this as a “worrying” scenario that could catch markets off guard.

Dimon’s remarks, made during an event hosted by Ireland’s Department of Foreign Affairs, underline his growing concern that the financial sector is becoming too comfortable despite persistent economic threats.

Persistent Inflation: A Multifaceted Threat

The Fed recently decided to keep its benchmark interest rate steady at 4.25%–4.5%, even as Chair Jerome Powell cautioned about “significant” inflationary risks ahead. One such risk comes from President Donald Trump's aggressive tariff proposals, which are likely to raise consumer prices on imported goods.

Dimon pointed to several structural drivers behind the inflation threat, including trade policy shifts, rising government deficits, and tighter immigration controls all of which can restrict supply and push prices higher. He also cited long-term global trends such as demographic shifts and the restructuring of international supply chains, noting their tendency to fuel inflationary momentum.

Data Uncertainty and the Challenge of Real-Time Insight

As head of the largest U.S. bank by consumer deposits holding 11.3% of personal bank deposits Dimon has access to vast pools of transactional data. Yet, he described the current stream of economic information as “nearly unreadable,” illustrating the difficulty of forecasting in today’s volatile environment.

This ambiguity in economic signals, he implied, makes it even more dangerous for markets to assume that the current monetary policy trajectory is fixed or safe from change.

Fed Under Pressure, Trump Escalates Criticism

The pressure on the Federal Reserve is mounting from both sides. While Powell maintains a cautious stance against inflation, President Trump has called for an immediate and aggressive interest rate cut, going so far as to demand Powell’s resignation. This political pressure adds a further layer of uncertainty for market participants who must now weigh both economic fundamentals and policy unpredictability.

Dimon’s comments serve as a reminder that financial markets may be underestimating the stickiness of inflation and the possibility of further Fed tightening. With major geopolitical shifts underway and economic data harder than ever to interpret, his warning should not be ignored. The potential for renewed rate hikes remains real and for investors, failing to prepare for that possibility could prove costly.

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Economic

Strong Quarter Anticipated for Wall Street Banks

America’s largest banks are set to post impressive second-quarter profits, marking a notable recovery in investment banking and trading segments. According to analysts, the earnings season kicking off with JPMorgan Chase, Citigroup, and Wells Fargo is likely to reflect solid revenue growth fueled by improved deal flow and market activity.

Stephen Biggar of Argus Research noted that “most banks are likely to beat expectations” in a quarter with no major surprises. The optimism stems from the late-quarter acceleration in investment banking activity, especially after a sluggish start due to tariff-related uncertainty and geopolitical tensions that had previously suppressed M&A transactions to their lowest levels in two decades.

Investment Banking and Trading Recovery

Betsy Graseck of Morgan Stanley highlighted that investment banking revenue is expected to exceed forecasts, driven by a healthier deal pipeline. Executives at Bank of America and Citigroup echoed this sentiment, projecting mid-to-high single-digit revenue increases in trading, citing persistent macro and geopolitical volatility as ongoing catalysts for market activity.

Goldman Sachs analysts also anticipate sustained trading strength in the near term, attributing it to investor repositioning amid global instability.

Net Interest Income and Credit Quality Remain Solid

While loan demand remains relatively subdued, net interest income (NII) across the sector is projected to rise modestly between low to mid-single-digit percentages thanks to favorable interest margins. Furthermore, banks are expected to reduce their provisions for credit losses, reflecting continued resilience in consumer and corporate credit quality.

Wells Fargo analyst Mike Mayo raised his loan growth forecast for the industry from 3% to 5%, signaling potential momentum in lending activities. Still, he cautioned that sustainability remains a key question for investors tracking the sector’s forward outlook.

Regulatory Tailwinds and Capital Deployment

Another earnings driver is the relaxed regulatory environment under President Trump’s administration. Following their successful completion of the Federal Reserve’s stress tests, banks now have greater freedom to allocate excess capital toward dividends and share buybacks an area under close investor scrutiny.

The lifting of Wells Fargo’s asset cap, in particular, could usher in renewed growth initiatives, while Morgan Stanley’s CEO transition has been smooth, with Ted Pick now poised to pursue more ambitious strategic goals.

Individual Bank Forecasts

JPMorgan Chase: EPS is expected to grow 5%, with attention on net interest income, loan growth, and progress in its stablecoin project.

Bank of America: Projected EPS increase of nearly 4%, with NII up almost 7%. However, investment banking fees are set to decline to around $1.2 billion.

Citigroup: EPS is expected to rise 5%, driven by capital market strength. Costs and provisions may be higher than forecast, though analysts remain bullish.

Wells Fargo: Operating expenses are projected to dip slightly due to headcount reductions. Loan balances should rise modestly, with flat provisions.

Goldman Sachs: EPS is forecasted to jump nearly 11%, benefiting from growth in investment banking and trading revenue.

Morgan Stanley: EPS may increase over 7%, with investors awaiting updates on the rebound in investment banking. CEO Ted Pick is viewed as well-positioned to enhance brand value and market share.

Despite headwinds from trade policy uncertainty and political transitions, U.S. banks are expected to deliver a strong earnings season. With improving conditions in investment banking, resilient NII, and solid credit performance, the sector appears poised for cautious optimism so long as global instability does not derail the momentum.

Source: Rueters

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Economic

Cryptocurrency

EU Raises the Bar on Crypto Investor Protection

In the latest development under the European Union’s Markets in Crypto-Assets (MiCA) framework, ESMA has warned crypto asset service providers (CASPs) against misrepresenting the scope of regulation to customers. Specifically, the agency is concerned about platforms that offer both regulated and unregulated products without clearly distinguishing between them.

ESMA emphasized that such practices pose “investor protection risks,” as customers may mistakenly believe all services fall under MiCA's investor safeguards. These include mandatory asset custody protections and formal complaint-handling processes, intended to create a safer investment environment within the EU crypto space.

Misuse of Regulatory Status as a Marketing Tool

The regulator took particular issue with CASPs using their MiCA-regulated status as a marketing gimmick. According to ESMA, some providers intentionally promote regulated registration to give the illusion that all products offered are covered, even when some services like direct investments in commodities (e.g. gold) or crypto lending remain outside MiCA’s scope.

ESMA stressed that regulatory approval should not be used as a promotional badge, and any insinuation that all products are MiCA-compliant when they are not could mislead consumers and potentially violate EU rules.

The FTX Fallout and Regulatory Vigilance

The warning comes amid lingering regulatory concerns following the 2022 collapse of FTX, which exposed massive gaps in oversight and resulted in billions in investor losses. Regulators worldwide have since tightened scrutiny on crypto firms, with the EU emerging as a global leader in formalized crypto oversight through MiCA.

Under MiCA, CASPs must obtain regulatory approval from a national authority before gaining “passporting” rights to operate across the EU. This cross-border access adds urgency to ensuring that licensing and supervision standards are consistent and robust.

Spotlight on Malta’s Licensing Standards

Coinciding with ESMA’s statement, the agency released a peer review of Malta’s crypto licensing process. The report noted that while Malta’s financial services authority has the expertise and resources to handle crypto licensing, the risk assessment procedures for at least one unnamed firm were only “partially satisfactory.”

Although Malta has often been viewed as a pioneer in digital asset regulation, the review signals that ESMA will continue to evaluate the quality and consistency of member states' regulatory frameworks.

A Clearer, Stricter Future for EU Crypto Markets

With MiCA now in effect, the EU is enforcing a firmer line on how crypto firms operate and market themselves. ESMA’s warning serves as a reminder that regulation is not just a legal formality but a trust-building measure. Firms attempting to blur regulatory boundaries or exploit partial compliance for competitive advantage risk reputational damage and legal consequences.

As the regulatory ecosystem evolves, consistent enforcement across EU nations will be key to maintaining market integrity and investor confidence. Crypto companies hoping to operate across Europe must now align not only with technical compliance but also with a culture of transparency and accountability.

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Economic

A Decade of Infrastructure Focus and Strategic Positioning

Established in response to Western reluctance to grant China greater influence in institutions like the IMF and World Bank, AIIB was born from a desire to address a clear development gap: infrastructure. Unlike traditional development banks prioritizing poverty alleviation, AIIB has concentrated on large-scale projects in transport, energy, water, digital infrastructure, and health delivering over $61 billion in funding across more than 320 projects in 38 economies.

Under the leadership of founding president Jin Liqun, AIIB prioritized cooperation over competition. Despite initial Western skepticism especially from the U.S., which lobbied against the bank’s creation AIIB expanded its membership from 57 to 110 countries, demonstrating widespread support for infrastructure-led growth in developing regions.

Leadership Transition Amid Global Uncertainty

The upcoming appointment of Zou Jiayi, a senior figure from China’s Ministry of Finance, signals continuity but also raises questions about AIIB’s trajectory in a more volatile geopolitical environment. Unlike Jin, who held positions abroad including at the World Bank and ADB, Zou’s career has remained primarily domestic. Nevertheless, her familiarity with multilateral financial cooperation suggests a steady hand.

This leadership shift comes as U.S. President Donald Trump initiates a sweeping audit of global institutions, potentially applying indirect pressure on multilateral banks. While AIIB has remained relatively untouched by U.S. criticisms unlike the BRICS New Development Bank maintaining neutrality will become increasingly challenging.

Avoiding Politics, Delivering Impact

One of AIIB’s defining strengths has been its commitment to political neutrality. As Jin noted in a 2016 Financial Times interview, AIIB “will not do anything politically motivated.” This apolitical stance has helped the bank gain legitimacy and work alongside legacy institutions like the World Bank and Asian Development Bank to co-finance impactful projects.

Notably, AIIB claims to have helped construct or upgrade 51,000 km of roads and rail, improve irrigation systems for 22 million people, develop over 21 GW of renewable energy, and cut 28.5 million tons of CO₂ emissions. These achievements reinforce its capacity to act as a reliable, efficient development partner.

The Road Ahead: ESG, Green Finance, and Private Sector Engagement

As Asia faces the dual pressures of climate change and supply chain realignment, the demand for sustainable infrastructure financing is intensifying. Urbanization, smart logistics, renewable energy, and climate-resilient agriculture are all capital-intensive sectors that require long-term, strategic investment exactly where AIIB can add value.

Future success will hinge on President Zou’s ability to balance large-scale infrastructure ambitions with rigorous environmental, social, and governance (ESG) standards. Moreover, AIIB’s flexible approach allows it to collaborate with private partners on complex, high-impact projects, a key differentiator from older, more bureaucratic institutions.

AIIB has proven itself over the past decade as a pragmatic, responsive, and collaborative institution. If it can preserve its multilateral orientation and avoid political entanglements, it is well-positioned to become one of Asia’s most influential financial engines. With leadership transition on the horizon and infrastructure needs growing more urgent, the bank’s next chapter will be critical for shaping the region’s sustainable development landscape.

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Economic

US manufacturers secured the business tax provisions they’d hoped for in Donald Trump’s budget megabill, but the president’s erratic trade policy risks tempering any pronounced pickup in capital investment.

Many producers this year had put spending plans on hold due to uncertainty surrounding the tax and spending legislation as well as Trump’s vacillating tariff announcements.

Manufacturers can now breathe a little easier after Trump’s signature $3.4 trillion budget package reinstated a 100% first-year bonus depreciation for investment in equipment and factories. The legislation also allows for an immediate deduction for research and development costs and more generous interest deductibility.

Making the tax provisions permanent will cause some companies to make capital investments, even if it’s difficult to predict how much, said Charles Crain, managing vice president of policy at the National Association of Manufacturers, which made extending the provisions a priority.

“There are certainly still impediments to capex on the table, but tax was a huge one and it is now off the table,” Crain said.

Still, some expect any notable upturn in capital expenditures to take longer to evolve because of the administration’s frenetic tariff announcements as well as the levies themselves. Higher duties on sectors, such as metals, risk driving up costs of production.

“If companies can’t price their product accurately because the input costs keep changing due to an ever-changing tariff environment, then I think their decisions will stay largely frozen,” said Susan Spence, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee.

Trump this week sent letters to US trading partners threatening high tariff rates, though he left the door open for negotiating trade deals. He also extended a Wednesday deadline to impose higher punitive measures until Aug. 1.

The president said his administration will impose a 50% duty on imported copper. Having already placed levies on steel and aluminum, there is notable concern from US buyers that the metals tariffs risk undermining Trump’s goal of reviving manufacturing.

Business surveys have consistently showed waning capital-spending intentions following the November election. But the Association of Equipment Manufacturers is optimistic that the new legislation will provide the certainty needed to bolster investment in domestic manufacturing, especially by small and mid-size companies, said Kip Eideberg, senior vice president of government and industry relations.

Optimism over the passage of the president’s One Big Beautiful Bill Act has helped drive up stock prices.

“When I go around the country or CEOs come into Treasury to see me, they’ve all been held captive by a lack of certainty on this tax bill,” Treasury Secretary Scott Bessent said on CNBC last week. “And now that they know that they can have a hundred percent full expensing on equipment and for factories, I think we are going to see things take off between now and Labor Day.”

Leigh Lytle, chief executive officer of the Equipment Leasing and Finance Association, said she also expects the tax provisions will encourage companies to buy sooner, rather than later, and boost hiring. While tariffs have been a concern, the provisions “provide long-term certainty that these businesses need,” Lytle said.

Indeed, some small manufacturers are taking the plunge. Courtney Silver’s plans to spend more than $1 million on equipment for her Concord, North Carolina machine shop were put on hold until it was clear whether Congress would allow businesses to fully expense most equipment purchases. Now she’s ready to move forward.

“It give us the confidence to take that step,” said Silver, president of Ketchie Inc. “It’s the right move to support our team, grow smarter, and stay competitive.”

In northern Maryland, Giuseppe Riva expects to sell more steel fabrication machines with the new bonus depreciation rules, at least judging from what he saw in Trump’s first term.

At the time, Riva was leading the North American unit of Italian woodworking machine maker SCM Group. Many of his clients were furniture makers, who spent tens of thousands of dollars for SCM’s computer-guided wood-cutting machines.

After Congress passed the 2017 tax cut bill, enacting an earlier round of bonus depreciation, Riva said his clients opportunistically ordered new woodworking machines worth roughly equal to their tax savings.

“Instead of paying taxes, the thought was, ‘Send me a new machine,’” Riva said.

Riva has since moved into a new role leading the North American unit of Italy-based Ficep S.p.A., which makes machines that cut and drill steel. Riva said his products now cost more, averaging over $1 million. He expects customers to be more measured with their purchases.

However, Riva anticipates a pickup in sales because the new tax rules open the door to bigger, longer-term purchases, he said.

US capital expenditures rose after the introduction of 100% bonus depreciation in the 2017 tax act, but it was not the key driver because other factors encouraged firms to invest, including slashing the corporate tax rate, Pantheon Macroeconomics economists Samuel Tombs and Oliver Allen said in a note.

While the tax provisions likely will lift business investment in the medium term, “we expect firms to hold back from deploying their capital until the tariff outlook has clarified,” the Pantheon economists said.

There’s little to suggest the tax provisions alone will spur a large burst of capital investment, said Michael Hicks, an economics professor at Ball State University in Indiana and director of its Center for Business and Economic Research.

Most manufacturing-intensive states accommodate new capital investment with large subsidies, and there’s already been a burst of manufacturing capital investment — including record factory construction — spurred in part by federal incentives under former President Joe Biden, Hicks said. And Trump’s tariffs continue to beleaguer manufacturers, he added.

“In the end, the ‘best case’ likely tariff scenario adds far more costs to most capital investment than this legislation could possibly offset,” Hicks said.

Source: Bloomberg Europe

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Economic

China–U.S. Trade War

Sharp Turn in U.S. Trade Policy

President Donald Trump has reasserted his aggressive trade stance by unilaterally announcing a 30% tariff on all goods imported from the EU and Mexico. The move, revealed through separate open letters posted on Truth Social, marks a return to the combative trade strategy that characterized earlier phases of his administration.

These announcements surprised markets, as investors had anticipated more moderate measures. According to Axios, the tariff rate imposed this week exceeds market expectations and introduces fresh volatility into global trade relations.

Implications for EU and Mexico Negotiations

The letters delivered a clear ultimatum to European leaders: eliminate tariffs and allow U.S. companies full, unrestricted access to EU markets, or face significant penalties. These demands have likely disrupted negotiations aimed at reaching a U.S.-EU trade agreement later this month.

As for Mexico, Trump’s new 30% tariff comes amid mounting regional tensions. It follows a previous announcement imposing a 35% tariff on Canadian goods now the highest among North American trading partners. Trump explicitly tied these actions to drug trafficking concerns, referencing U.S. Customs data showing May fentanyl seizures at the Mexican border were 20 times higher than at the Canadian border.

Broader Escalation and Strategic Intent

The latest moves are part of a broader tariff escalation strategy. On July 10, Trump told NBC News he was preparing to apply a “comprehensive” 20% tariff on all other foreign imports double the 10% global base tariff announced back in April.

Additionally, Trump this week announced a staggering 50% tariff on copper, which could send shockwaves through supply chains in construction, electronics, and renewable energy. Copper’s centrality to the global economy makes this particular move especially consequential for inflation-sensitive sectors.

Rising Trade Barriers, Global Uncertainty

These escalating tariffs threaten to upend global supply chains, strain alliances, and amplify uncertainty for exporters and manufacturers alike. Businesses in both Europe and North America now face the urgent task of re-evaluating pricing, contracts, and supply routes as the August 1 deadline looms.

With ongoing negotiations between Washington and Brussels hanging in the balance, and North American trade partnerships growing increasingly strained, President Trump’s recent flurry of tariff letters signals a more protectionist phase ahead one where trade diplomacy takes a back seat to unilateral pressure.