The new record of the Dax is 16,064 points.
(Photo: dpa)
Frankfurt Today’s market headline could have been: The Dax is collapsing. Instead, the Dax set a new record high in early trading with 16,050 points – and later even expanded it to 16,064 points. The US stock exchanges have also reached new record highs.
This is surprising, because after all, the US Federal Reserve (Fed) initiated the long-feared turnaround in monetary policy on Wednesday and is buying fewer bonds from this month onwards.
Four weeks ago, the fears of a withdrawal of liquidity by the central banks, coupled with rising inflation rates, were enough to send the stock exchanges down in the meantime. At that time, the Dax even slipped below the 15,000 point mark.
This shows that investors in the markets are nervous – the stock exchanges can fall as quickly as they went up. Intermittent setbacks like the last Dax all-time high of 16,030 points in mid-August are likely.
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Investors see the glass half full
For the moment, however, investors see the glass half full again. The Fed has even calmed the markets with its announcement and its timetable for the exit from bond purchases by mid-2022.
Concerns about stagflation, i.e. an economic standstill with rising inflation rates at the same time, have also disappeared in recent weeks. In addition, most companies have now presented good quarterly results, which have often exceeded expectations.
But there are many reasons for potential setbacks. These include rising inflation rates and bond yields, as well as speculation about when the Fed will actually raise interest rates and whether the supply bottlenecks in the economy will resolve.
In addition, Corona has not played a role on the stock exchanges for a long time. That, too, can change with the now significantly increasing number of cases. All this does not mean, however, that the stock exchanges will collapse on a massive and lasting basis. On the contrary: they should continue to rise.
There is even more liquidity in the markets
The liquidity pumped into the system by the central banks is still enormous and will even increase next year. In addition, bond yields will likely remain too low for a long time to be an alternative to stocks.
The economy is currently also being slowed down mainly by the supply chain problem and the shortage of raw materials, not just by a lack of demand. In addition, the Fed and the European Central Bank are still ready: They are not interested in excessively high bond yields and will therefore intervene in the future if the situation becomes critical. Therefore, from the point of view of the markets, the Fed’s monetary policy turnaround is not all that great.
More: The US Federal Reserve is already curbing its bond purchases from this month