The business climate in Germany has recently improved, says Handelsblatt editor Frank Wiebe. But the situation is not promising for investors.
Even a little light gives hope in the dark. This can be seen shortly after the fourth Advent in the current index of the Munich Ifo Institute. After that, the business climate in Germany improved from 86.4 to 88.6 points, and that was already the third increase in a row, despite the cold weather and corresponding concerns about the energy supply.
Christoph Swonke, the economic analyst at DZ Bank, therefore speaks of a “conciliatory end to the year”. Michael Heise, chief economist at HQ Trust, comments: “Germany’s economy is developing more robustly than expected.”
However, Heise does not hide the fact that this ray of hope is not all that promising from an investor’s point of view. Because after his evaluation of the statistics shows: The German share index (Dax) usually develops better after a weak than after a strong index.
That is the logic of the stock market, which at first glance seems odd: when there is pessimism, prices are low and investors’ cash holdings are high, so there is still a lot of room for improvement. In the case of optimism, on the other hand, the stock market has usually already run and the money has already been invested.
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At 88.6 points, the Ifo index is on the way to optimism, but not quite there yet. The evaluation shows that with a level below 90 points, the Dax has improved by an average of 13 percent in twelve months, and the probability that the prices will rise at all was 78 percent.
With scores between 90 and 100, prices rose by an average of almost 7 percent, and the probability of prices rising was 70 percent. At over 100 points, the Dax only rose by 0.5 percent on average, and the probability that it rose at all was 44 percent, so prices fell in significantly more cases.
Overall, the leading German index showed a friendly trend on Monday. At the end of trading, the Dax was up 0.4 percent. The leading European index, the Euro Stoxx 50, was slightly down. It was the calm after the storm of the previous week. The central banks of the USA, Great Britain, Switzerland and the European Central Bank (ECB) had raised interest rates significantly, which led to an overall very weak stock exchange week, which interrupted the interim rally from the lows for the year. On Monday the mood was more like that it probably won’t be that bad after all.
Monetary politicians do not want to please investors too much
The sales in the previous week were surprisingly high because there are actually signs of a slowdown in inflation and the central banks have already slowed down their rate hikes. But policymakers have also been careful not to make investors too happy — because rising stock prices mean investors are feeling richer, which can fuel demand and thus inflation.
If you want to know how things will continue, the experts will point out the danger of a recession. And there are very different assessments of this, there is no clear line to be seen – except that Europe will probably get it worse than the USA. In the coming months, the economic data will provide the most important impetus for the stock exchanges.
All in all, it can be seen that equities suffered in the year of the interest rate turnaround, but held up to some extent and are now valued quite solidly. Bonds are becoming more interesting again because of higher interest rates. Depending on whether one assumes that the inflation figures are still high or the significantly lower expectations, real positive returns – i.e. calculated after price increases – are within reach.
More: Short sellers are closing their bets against bank stocks worldwide