The German leading index has marked a new record high. Now it should no longer take that long before the 13,000 point mark is also lastingly cleared. Our year-end target would thus be reached some weeks earlier than planned.
We are currently experiencing one of the longest economic and equity market upswings in economic history. The last recession dates back to the year 2008 and, regardless of the numerous crises, the trend on equity markets has also been heading visibly uphill since March 2009. Due to the length of the upswing, many investors now believe a crisis to be long overdue. In expectation of an impending crash, the readiness to rely on equities is therefore declining, even if the hoarding of liquidity at low or negative interest rates means a real loss in purchasing power.
Many characteristics typical of the end phase of a stock market boom can indeed be noted on the equity market. These include the numerous M&A transactions or the high valuation of American technology companies. But predicting a crash on the basis of this is not possible.
The conditions underlying the equity markets also signal that 2018 will be a good year. The good economic trend should continue and there are no signs of an approaching end. The days of above-average gains on the equity market are clearly over, but we still see good prospects of modest advances thanks to steady profit growth and persistently low interest rates. For this reason we also feel optimistic about German equities in 2018 and expect prices to head towards the 13,500 mark. In the longer term, i.e. in terms of the high in the current cycle, we consider the 14,000 point mark to be attainable. As we head towards this mark, there should still be sufficient possibilities for raising exposure to positions, particularly because the valuations of German equities are not too rich.