Economy

DAX rises to 15,000 points by the end of the year

DAX companies have come through the crisis year 2020 very well. The reporting season for the final quarter is still underway, but company sales are expected to have fallen by only four percent last year. Profits should have been 14 percent lower than in 2019. In previous recessions, profits fell by an average of one-third, much more than last year. Equity analysts expect profits in Germany’s leading index to rise by 30 percent this year and post record profits again as early as 2022. Although companies‘ earnings expectations in the past have (almost) always proved to be too optimistic in retrospect, this assessment is in line with the course of previous earnings cycles on the stock market. As a rule, it took around two and a half years for the old profit highs to be reached again. The prerequisite for a sustained recovery in corporate profits remains a stable forecast…

David vs. Goliath 1:0 – What’s really behind the „GameStop“ speculation

In one of the biggest hedge fund bailouts since the fall of Long-Term Capital Management („LTCM“, 1998), the firm „Melvin Capital“ was saved from ruin this week. The firm had previously speculated on sharply falling prices of various stocks such as Gamestop (selling video games) or AMC Entertainment (cinemas). Both companies had recently suffered greatly from the Corona crisis and the structural trend towards online media, so betting on falling prices seemed lucrative. But the organised resistance of numerous „small investors“, organised via the internet platform Reddit, destroyed the hedge fund’s strategy within a few days. The investors colluded with each other and drove up the prices of said shares with small purchases each.  Since, for various reasons, more Gamestop shares were sold short than actually existed, the so-called „short squeeze“ occurred and Melvin Capital had to cover open positions at dramatically higher prices. In view of the parabolic price…

Family as a success factor

A new study by DZ BANK Research shows: Family businesses are of great economic importance for Germany: over 90 percent of businesses are family-owned. They are not only located in urban areas, but often also in rural regions. In some cases, they are of enormous importance for the economic structure there. The Corona pandemic is also leaving its mark on family businesses. According to an ifo survey, around 80 percent of businesses suffered a drop in orders last year. Family businesses are facing structural challenges. Demographic change will strongly influence the future development of businesses. In the context of generational change, a suitable successor is not always found, and the shortage of skilled workers is also a problem in many industries and rural regions. On the technical side, digitalisation is changing established business models and structures. Especially in rural areas, however, the expansion of the digital infrastructure is not yet…

Euro-area economic outlook: The hope for the recovery lives!

The Corona pandemic is in the middle of its second wave, but the signs of an imminent economic upturn are increasing. This is illustrated by the current development of out leading economic indicator. The DZ BANK Euro Indicator rose by 0.8 percent to a level of 98.8 points in January 2021. This means that the indicator’s annual rate of change of +0.2 percent is above the zero line again for the first time in around two and a half years. The setback in November, when the beginning of the lockdown in a whole series of countries had a noticeable impact on the European sentiment indicators in particular, was more than made up for in the past month. Almost all the sub-indicators included in the calculation have recently contributed to the improvement in our leading indicator.  For example, consumer confidence in Europe recovered somewhat in December according to the EU Commission’s…

China’s economy is „humming“ again

China’s economy is running at full speed again, with industry in particular „humming“, while the retail sector is increasingly making up for its losses from the spring. This is shown by the latest figures for industrial production (7% y/y) and retail sales (5% y/y) from November. At the same time, sentiment readings from the industrial and service sectors have almost universally climbed to multi-year highs. The momentum of the Corona recovery has thus continued unabated in the closing quarter of the crisis year 2020. Economic growth is currently expected to return to pre-Corona levels, and we expect a growth rate of around six percent in the current fourth quarter. In 2020 as a whole, China is one of the very few economies to achieve positive economic growth at all.It borders on bitter irony that the country of origin of the pandemic has become one of the winners of the crisis….

Results of DZ BANK’s 50th SME survey: Covid-19 still a burden

The Corona pandemic has SMEs firmly in its grip. Increased infection figures and a renewed lockdown are preventing the economic recovery from the third quarter from continuing for the time being. The longer the crisis lasts, the greater its impact will be on many companies. It is little consolation that some sectors, such as construction, have so far been largely spared the negative economic impact. Overall, the results of our current representative survey of 1,500 SMEs, which we conducted for the 50th time this fall, show that the mood among SMEs is somewhat more positive than at the time of the first lockdown in the spring. Nevertheless, the current crisis represents the greatest challenge for SMEs since the financial crisis, if not longer. However, SMEs went into the crisis well prepared: according to calculations by the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken BVR (Federal Association of German Cooperative Banks), their…

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