Stock markets

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…

Turkish Lira: Well-known weaknesses come back into focus

  After a relatively calm period around the Turkish Lira in the past few weeks, with the USD-TRY remaining stable around 6.85 TRY, this calm has suddenly ended. For the first time since mid-May, the currency pair has left the 7.00 TRY mark and currently even the historically weak quotations from May behind. This movement is all the more remarkable as the US dollar is currently in a difficult position itself – especially compared to the situation in May – and illustrates the prevailing pressure on the lira. However, the existing domestic problems are by no means new. In spite of the relatively stable development in June and July, we had classified the constellation for the lira as fragile, as Turkey basically offers sufficient scope for attack with an economy sliding deep into recession, a clearly rising budget and current account deficit and an expansive monetary policy course of the…

Corona crisis throws the euro zone back into 2005!

The cross-border corona lockdown led to a 12.1 percent quarter-on-quarter decline in gross domestic product (GDP) in the euro zone in the second quarter. This slump is not only historically high. GDP is now even only at the level of 2005! 15 years of economic activity have been set back within only two quarters. Despite the expected recovery, some of which will be strong, it will take some time to make up for this setback. A look at the large member states, for which initial calculations or estimates are already available, also shows the drama of the corona recession. In the second quarter of 2020 all countries had to record double-digit declines in quarterly rates. The German economy was the best performer. Here, the minus was 10.1 percent, in Italy -12.4 percent, in France -13.8 percent and in Spain even -18.5 percent. These were all unprecedented declines in economic output…

USA: Corporate earnings collapse

The reporting season in the USA started last week. In the second quarter, corporate earnings are likely to have fallen by almost 50% year-on-year. This would be the sharpest drop since the 2008 financial crisis. In particular, corporate earnings in the energy and consumer goods sectors are likely to have fallen significantly. Energy companies suffered from the low price of oil, while consumer goods manufacturers felt the impact of the collapse in demand and disrupted supply chains. Airlines, car manufacturers and companies in the travel & leisure industry (hotels, cruise ships, casinos) were particularly hard hit. Many of the companies are in the red. They are partly dependent on state aid. Analysts do not expect profits to rise in any of the eleven US sectors. Even the cyclically stable utility stocks are likely to have earned less than last year. The same applies to the IT sector, where profits are…

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