Dusseldorf Psychological effects should not be underestimated on the stock exchange. A phenomenon that can be abbreviated to four letters seems to be playing a role: FOMO. The “fear of missing out” effect means many investors fear missing out on a stock rally. This is exactly what could help the Dax again this week – just like last Friday. It even reached an all-time high of 16,331 points during trading.
The stock market starts cautiously this Monday. The leading German index was hardly changed at 16,254 points, a drop of 0.1 percent.
Given the risks on the markets – high inflation, high interest rates, the ongoing risk of recession – the current rally came as a surprise to many large investors. The fear of not participating in rising prices in time worries professionals even more than private investors – they are therefore buying more again. That showed the latest Bank of America survey of fund managers.
Institutional investors still hold fewer shares than the trend-setting indices indicate for their portfolios.
They are therefore chasing the stock rally – and now they want to change that. A factor that should also benefit the Dax, which has increased by around 16 percent since the beginning of the year.
Debt dispute in the US creates uncertainty
At the same time, distrust and concerns among investors are growing on the stock exchanges on both sides of the Atlantic with each passing day that there are no signs of an agreement in the US debt dispute. At the beginning of June, the US government is threatened with a default if US President Joe Biden’s team does not reach an agreement with the Republicans in Congress on raising the debt ceiling by then.
>> Read here: A slightly different view of the Dax
In the USA, parliament sets such a limit at irregular intervals and determines how much money the state can borrow. This time the procedure has degenerated into bitter tugging, which harbors great dangers: A default by the world’s largest economy could trigger a global financial crisis and an economic downturn.
Now there should be another top meeting. Biden and opposition Republican negotiator Kevin McCarthy plan to meet Monday to continue negotiations. This was announced by the US President’s Office and McCarthy on Sunday.
Meanwhile, US Treasury Secretary Janet Yellen increased the pressure on Republicans. The deadline by which a solution must be found to prevent the United States from defaulting on payments cannot be extended, Yellen told NBC on Sunday. June 1st is a “tough deadline”.
>> Read here: After the Dax record: These trends will move the markets
How sustainable will the recent stock market surge be in this situation? Some strategists and economists have their doubts – also against the background of an economic slowdown in Europe and the USA. “It therefore seems likely that the Dax will soon take a breather,” says Ulrich Stephan, chief investment strategist for private and corporate customers at Deutsche Bank.
look at markets
Gold: The nervousness of investors is currently reflected in major price fluctuations, such as on the commodity markets. The big beneficiary of this development is the anti-crisis currency gold: the price of the precious metal has been rising for some time. As of today, Monday, the price for a troy ounce is around 1975 dollars – around eight percent more than at the beginning of this year.
Currency: The euro started the new week on a stable note. The common currency was trading at $1.0820 in early trade, about the same as before the weekend. The European Central Bank (ECB) last set the reference rate at $1.0808 on Friday afternoon. “I think we’ve come a long way in containing inflation and getting it back on target,” said ECB President Christine Lagarde in an interview broadcast in the Netherlands on Sunday.
Oil: Oil prices eased slightly on Monday. At times, a barrel of WTI crude oil cost $71.65 and a barrel of Brent crude oil $74.72. Some analysts currently see the market heading towards a supply deficit. The latest report from the International Energy Agency (IEA) shows that after eleven months of building up, the commercial oil stocks of the OECD countries fell by 14 million barrels in February and by as much as 56 million barrels in March.
bonds: The yield on the 10-year federal bond fell slightly and stood at 2.44 percent on Monday. Ten-year US bonds are yielding 3.66 percent.
With agency material. Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.