Stock markets

Quantitative strategies in stress testing

For many investors, time, patience and financial resources are limited which also means that the possibilities for active stock picking are also limited. Quantitative strategies can help here. At the beginning of 2018, we presented various quantitative strategies that had delivered good results in the past and that we have now reviewed. Last year was not an easy year for equities, with quantitative strategies also showing weak results and often performing disappointingly. For quantitative portfolios, it is difficult when longer-term trends are breached, as we saw in 2018. All in all, however, the results of the previous year have confirmed that outperformance can be achieved on the basis of simple screenings. Nevertheless, the volatility of the strategies can be high. We continue to see very good results in the past and, derived from this, good opportunities for the future in screenings of companies with a favourable mix of valuation ratios….

US reporting season: How big will the fall be?

The USA enjoyed a boom based on tax cuts and monetary policy stimuli for a long time. But in the past few months American bullishness about the economy and US stock markets have also taken a heavy beating in the wake of the trade disputes and the government shutdown. The reporting season for full year 2018 will now show just how much the US economy has really deteriorated and to what extent the companies will have to revise down their guidance. We assume that US companies will report double-digit growth figures (+11.4%) for the fifth consecutive quarter and will have performed far better than their European competitors. But the market will attach relatively little importance to the figures of the past. In the run-up to the reporting, for example, two thirds of the companies already lowered their guidance and analysts also lowered their estimates more than at any time since…

Investment year 2018: equity markets and low interest rates hamper the accumulation of private financial assets

Based on our preliminary calculations, the financial assets of private households in Germany are expected to have increased by 1.9 percent to EUR 6.2 trillion in 2018. Asset accumulation has slowed down significantly compared to 2017, where it was still growing at a rate of 5.4 percent. Growth was driven almost exclusively by the prudence of German citizens. Private households put away more for a rainy day in the first three quarters of last year than in the respective quarters of the previous year. The savings ratio for 2018 as a whole is likely to have risen by 0.3 percentage points to 10.2 percent. This marks the fifth consecutive year in which Germans are saving a growing proportion of their disposable income. Nonetheless, we have been seeing a growing “investment backlog” as regards the formation of financial assets for several years now. German private investors tend to shy away from…

2018 equity-market performance: The worst year since 2008

The end of the year is already drawing nigh on stock markets: it is true that trading will continue during the coming week, but trading hours are going to be shorter. The DAX is likely to end the year 18 percent lower, while the annual price loss for the Euro Stoxx 50 should amount to somewhat more than 12 percent. To find a worse European equity-market year, we would have to go back as far as to 2008. In the political and sporting domains, 2008 was not, admittedly, a particularly exceptional year – Angela Merkel was already Germany’s Chancellor and FC Bayern München finished top of the Bundesliga. In the USA, George Bush Jr. was the incumbent president and Blackberry devices were the state of the art for corporate telecommunications (there are said to definitely still be people who wish this era would return). In capital markets, however, 2008 was…

Dividend aristocrats offer attractive yields after correction

Sentiment on the markets is negative, driven by a raft of political upsets that are weighing increasingly on economic growth and have led to a flight into supposedly safe havens. With losses of around 16%, this has been the worst year for German equities since 2008. US tech stocks were the only area in the equity sector to have generated a significant profit in 2018. It will not be possible to resolve many of the problems on an ad hoc basis, so that companies will be up against a challenging environment in 2019 as well. However, the price correction does appear to be overdone. Although the pace of growth is easing, economic output will continue to rise in the large countries. As we see it, there is no doubt that the profit warnings of recent months and persisting uncertainties will impact on the dividend distributions. DAX dividend expectations for 2019…

Equities: danger of the „dividend strategy“ myth

Nothing seems to attract investors so much as high dividend yields and their reinvestment. For some years now dividends have become the „new interest income“ among institutional investors. Individual investors have also discovered dividends and have been blogging about everything to do with „dividends as a second source of income“. There has been an explosion in the number of dividend blogs. Moreover, on websites, investors often only buy those stocks which pay the highest dividends. Many investors hardly bother with a fundamental analysis of the companies in question. A broad spread across 50 stocks or more aims to protect from risk. Special stocks (e.g. American master limited partnerships) or stocks which pay a tax-free dividend are often added to portfolios without any previous checks. Much as we welcome the fact that German investors are now also investing more in equities as part of building up a pension pot, shareholders should…

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