Stock markets

DAX before record level – what now?

The less dynamic global economy is weighing on domestic exports. The so important automotive industry is undergoing long-term structural change – with an uncertain outcome – and many companies in the DAX are still struggling with homemade problems. Trend themes in technology, the Internet and other sectors are being driven forward in the USA and China, not in Germany. No wonder that the soon to be highest level in DAX history feels somewhat wrong. After all, the profits of DAX companies have been falling for a good three years. Without wanting to get close to the guarantors of success in the index (SAP, Allianz, Adidas or Siemens), who were able to more than compensate for the price losses of the „underperformers“: In fact, a significant part of the DAX upturn is not due to the „sexiness“ of the index companies, but rather to the fact that the DAX is a…

2020 is an election year in the USA – a few facts and figures for the stock markets

In a few months the president will be elected in the USA. Today, it is not even known who will run. What is certain, however, is that emotional reporting and daily changing forecasts will soon be on the agenda. Since strong emotions are not known to lead to the best investment decisions and many election forecasts were clearly off target, here are some historical data. Due to the complicated US electoral system, a victory does not require a majority of votes, but a majority of electors. For example, Trump 2016 received only 46% of the votes, but 57% of the electorate. In almost 40% of the elections the winner did not have a majority of the votes. Moreover, the outcome of the election always depends on the result of the „swing states“, which depends on the inclination of the swing voters. Since the Second World War, there have been 18…

Stock markets on the hunt for records

Although the current reporting season shows that companies are experiencing a significant headwind as a result of the ongoing political disputes, this is not the case with the rest of the world. Capital expenditure in particular is suffering from continued uncertainty. Actually, this is not the ideal environment for the stock markets. But the markets live from expectations, which have become less negative in recent weeks. Brexit, for example, is not being resolved, but is being postponed again by three months. And the USA and China have approached each other in the trade dispute. Hopes were nourished that a partial agreement would be signed at the Asia-Pacific summit in Chile in November. The summit has now been cancelled because of the unrest in Chile, but the US still does not expect any delays. The expansionary orientation of the central banks is also having an effect, at least on asset prices….

No end to uncertainty yet

Uncertainty remains the determining factor for the economy and financial markets. The Brexit and the US-Chinese trade dispute, two of the most important political issues, may have come closer to a solution in the last few days. However, it is not yet clear where the journey is heading. As for the week ahead, important economic data is expected from both sides of the Atlantic. Economic growth in both the euro zone and the United States is likely to have slowed again in the third quarter. Investment in particular is suffering from continued uncertainty, while companies remain cautious in the face of a lack of clarity regarding future prospects. Growth in the euro zone is likely to have been considerably weaker than in the USA, and between July and September it was only just above zero. Industry in particular is suffering as a result of the international pressures. This is particularly…

Money market in the USA dries up, US Federal Reserve now steers against it

The liquidity problems on the US money market have existed for some time and have steadily intensified in recent months. In mid-September, the US Federal Reserve pumped liquidity back into the money market for the first time in more than a decade. The measure became necessary after the effective funds rate (EFFR), i.e. the interest rate at which banks lend money to each other, had risen significantly. The trigger for this escalation was a chain of events – such as the quarterly payments of corporate tax or the payments for new T-Bill issues by the banks – which all contributed to a further shortage of already tight liquidity. As a result, the US overnight repo rate rose sharply (intraday: 10%!). The Fed had to intervene with several injections of liquidity totalling around USD 75 billion, causing money market rates to fall again. After that, it was actually clear that the…

Monetary policy overshadows weak corporate data

Geopolitical uncertainties and the effects of the trade conflict between the USA and China are causing a cooling of world trade, which especially the export-dependent industrial companies in Germany cannot escape. In the reporting season for the second quarter, domestic companies have revised their annual plans for 2019 by the dozen. Following the decline in 2018, DAX companies are threatened with a drop in profits for the second year in succession. This is not reflected on the stock markets. DAX & Co are close to their annual highs. The fact that the market is still reacting to the known negative factors was last observed in mid-August. The mixture of hardened rhetoric against China, the prospect of a No-Deal Brexit and a government crisis in Italy actually caused the DAX to fall to our target of 11,500 points postulated for the end of the year. However, it was not significantly stronger…

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