When it becomes even clearer how deep the feared recession will be, there will be better arguments for a stock market upswing, says financial editor Andrea Cunnen.
New year, new luck for investors. True to this motto, the stock exchanges started the new year on a positive note. The Dax gained a good one percent and closed at 14,069 points. Most other European stock exchanges also reported rising prices at the start of the year.
This is a good start after the terrible year 2022, in which the Dax lost 12.4 percent and the broad European stock index Stoxx Europe 600 even 13.9 percent. Striking: The shares of the companies that have suffered particularly badly in the past year were among the biggest winners on Monday.
In the Dax, for example, the shares of the automotive supplier Continental, the plastics manufacturer Covestro and the online fashion retailer Zalando gained five percent and more. These papers have lost between 33 percent (Covestro) and 54 percent (Zalando) in the past twelve months. The stocks of real estate groups such as Vonovia, Tag Immobilien and Aroundtown in the MDax small-cap index, which were even more battered in 2022, also rose sharply at the beginning of the year.
After the positive start to the new year, however, investors should not be misguided. After all, the markets rarely change with the turn of the year.
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Most strategists assume that the Dax and other indices will be higher at the end of 2023 than they are at present. Nonetheless, investors are likely to face turbulent times for the time being. Günter Heigl, Chairman of Asset Management at Fürst Fugger Privatbank, says: “The mood on the markets is currently being driven more by the desire for rising prices than by the facts.”
Dax starts the new stock exchange year with a profit
In fact, on the first trading day of the new year there were no facts or impulses that could have explained the price increase. Economic data was not forthcoming and there was little trading around the world. Wall Street was still closed on Monday, while the UK, Japan and the commodity markets were still on holiday.
>> Read here: The winning shares in 2022 – and their prospects for the stock market year 2023
The stock market year really doesn’t start until January 3rd and that’s when the German inflation data is an important indicator. Ultimately, it was inflation and the subsequent historical interest rate hikes by the central banks that were the decisive price driver or price destroyer on the stock exchanges last year.
The good news is that the central banks will not raise interest rates as significantly as they did in 2022, and inflation is likely to be nearing its peak in Germany, too. If it then becomes even clearer how deep the feared recession will be and how much it will affect company profits, there will be better arguments for a stock market upswing.
Fund managers like Paul O’Connor from Janus Henderson Investors emphasize that things are not that far yet: The interest rate and growth side of the coin will “probably continue well into 2023.”
More: Star investor Michael Burry warns of a renewed increase in inflation – on which stocks he is now betting