Economy

DAX heads for 12,500 points

Apart from the DAX the corporate profit performance of companies listed in the leading indices has been stagnating for several years. But share prices have risen nevertheless, admittedly primarily due to falling capital market yields. In the meantime, these made the upside potential for the future valuation of the equity markets look unlimited. In many cases, it was merely a question of how high the PER could rise in an environment of zero or negative interest rates and no longer of the business performance of the companies themselves. Market players are now likely to gradually turn their back on this view. After all, capital market yields have already been rising for some time now in the largest debtor market: for the first time in several years the valuation of US equity markets has risen significantly while yields have also increased considerably at the same time. For investors in shares this…

A Changing World

In 2007 a long-lived economic upswing came to an end. This upswing was marked by a strong increase in world trade and was driven by significant productivity growth. This combination resulted in an inflation rate that remained relatively low for several years flanked by simultaneously high global growth rates of around 5%. During this phase bond yields also continued the downtrend they had been charting for many years – this was the “Goldilocks scenario.” In this period questions about the distribution of wealth within society were largely irrelevant and were not discussed – admittedly also because property prices in some countries led to illusions of affluence and excessive debt during this time. But increasing world trade led to gradual but ultimately pronounced shifts in the levels of affluence between countries and social groups. The emerging markets benefited very greatly from globalisation whereas in the industrialised countries many groups of workers…

Greater growth momentum provides more scope for political field studies

The leading indicators of the emerging markets imply that growth momentum has already been picking up slightly in the last few months. This positive development is probably due for the most part to the higher price of oil. Growth momentum is now accelerating in the industrial nations too, supported by the more favourable development in the emerging markets. The greater growth momentum comes at exactly the right time. The last few days were marked by rapidly increasing political uncertainty, which could quickly have negative implications for sentiment among corporates and therefore further weaken the willingness to invest. These potential negative effects for the economy should be offset initially by the robust fundamental development. The latest robust economic development should therefore broaden the scope for political field studies. However, there are limits here too. Overwhelming uncertainty would have a negative effect on economic growth and therefore contribute overall to a slowdown…

Euroland: ECB inflation target almost reached

In January 2017, pressures on prices in the Eurozone were clearly much more pronounced than expected. The annual rate leapt to +1.8 percent on the heels of +1.1 percent in December 2016. That is the highest figure in almost four years. The rise in EMU consumer prices has thus taken a giant leap towards reaching the European Central Bank’s inflation target of “below but close to two percent”. The annual rate a few months ago was still only just above the zero-percent mark. Only in the last two months have consumer prices dared move into positive territory again – in unusually sharp bursts. The strong rise in inflation can be attributed to energy and food prices, the latter owing to the cold weather in recent weeks. Euroland inflation looks set to remain relatively high in coming months before falling again in the second half. What is behind the high growth…

US economy: Visible deceleration in foreign trade, but investment saves quarterly result

In the fourth quarter, economic growth in the United States decelerated visibly in comparison to the previous quarter. In the third quarter 2016, strong growth of an annualised 3.5 percent was recorded compared with growth for the final quarter of only 1.9 percent. Foreign trade also deteriorated, with declining exports opposite a marked increase in imports. This effect weighed on growth by no less than 1.7 percentage points and is hardly likely to be welcome by the new US president. It should be noted here though that soybean exports received a strong boost in the third quarter as a result of crop failures outside the United States. As usual, private consumption acted as the ultimate guarantor of growth with a positive contribution of 1.7 percentage points. However, this contribution was not as strong as in the two preceding quarters. Investment stepped into the breach, as it were. With a positive…

Dow Jones and other indices set new records: time for the five most important questions and answers

Many stock market indices are trading higher at the end of January than the majority of analysts expected in their forecasts for the end of 2017. The DAX is also already trading close to the DZ BANK year-end forecast. What further developments can be expected on the stock markets in 2017? The election of Donald Trump as President boosted the stock markets, contrary to expectations. We expect that the DAX could climb close to its record high in the spring. Thereafter, however, disappointment could set in as the Trump effect declines in the USA and focus in Europe shifts to looming political events, for example the elections in the Netherlands and France. The political environment indicates the potential for price fluctuations with a slight increase overall by the end of the year. What is driving the current upwards momentum? The true reason behind the upwards momentum on the stock exchanges…

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