Stock markets

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…

Stock market 2021: Valuation looks high, is high, can still rise

14,000 points in the DAX in an eventful week. At the moment, despite political adversity in the USA, it is actually easy to be positive about the stock markets. The end of the Corona pandemic seems to be in sight, despite teething problems with vaccinations in Europe. The unpredictable US President Trump is about to leave, the hard Brexit has been avoided and central bankers are pushing ultra-expansionary monetary policy to the extreme. Above all, the central banks‘ often miraculous monetary expansion looks like a huge marketing campaign for all asset classes. In recent weeks, an optimism, as measured by sentiment surveys and investor behaviour, has spread across the financial markets that has not been seen in this form for a long time. A large majority of private investors and financial professionals are „bullish“, i.e. they are betting on further rising prices. The prices of shares, corporate bonds, bitcoin and…

Six lessons investors can take away from 2020

The year 2020 is drawing to a close. It will go down in the history books as one of the saddest years in decades. 75 million people were infected with the Corona virus, some of them suffering from serious late effects. Over 1.7 million people lost their lives as a result of the Covid 19 pandemic. Behind every death there were indescribable human tragedies. But the virus also had an impact on other areas of life. Above all on global economic performance, which collapsed this year despite support. But the world of work and the lives of every individual also changed. Technological trends were intensified, the triumphal march of digital products and services progressed. The virus also affected politics. Disagreements over fighting against the corona virus and general policy directions were exposed and amplified via the leverage of social media. Political divisions increased, as demonstrated not only by the US…

Is someone raising his ugly head?

Inflation is the spectre of financial investors. Especially those who earn their bread in the bond market can remember earlier crash phases that wiped out the price gains of many years in a short period of time. These price slumps were actually always triggered by interest rate hikes by central banks, which in turn reacted to rising inflation rates or expectations. Today, we live in times of extremely low interest rates, and monetary policy is more expansive than ever before. Fresh liquidity, which the central banks pump into the markets to support prices, creates an extreme environment. Investors are looking for returns, and they are increasingly difficult to find. Bond market, stock market, real estate, precious metals – wherever you look, prices are extremely high. The greatest danger would be an end to the expansive monetary policy and a switch by the central banks to a restrictive course. This could…

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