Tailwind for Cyclical Stocks …
... provided that the US and China can at least reach a provisional agreement on the trade conflict. We think: From this perspective the current situation is better than generally perceived. But no improvement can be expected without an agreement.
Concerted monetary policy
The central banks of the USA and China as well as the European Central Bank relaxed their monetary policy in September. They took various measures by lowering key interest rates, lowering the minimum reserve rate and launching a new bond purchase program, and the international stock markets then made gains.
Trade conflict causes skid marks
In August, the trade conflict between the US and China escalated again, causing a slowdown in economic indicators. Meanwhile, the bond rally continued and gold became more expensive.
Once a month Florian Bohnet, Head of Research at DJE, talks about what investors can expect in the coming weeks. A further slowdown is expected in August, and more confidence is expected in September.
August lives up to its reputation of being a weak month for the stock market. That's why the biggest task is to limit losses first. Looking ahead, however, we are confident about fundamental and monetary indicators, most of which are in order.
Central banks have delivered - and disappointed
As expected, the US Federal Reserve lowered key interest rates by 25 basis points for the first time in ten years, and the ECB was thinking loudly about low interest rates and a possible bond purchase program. But market participants had expected more.
Our view to the future remains confident but the trees are unlikely to grow into the sky in summer. First of all the usual seasonality is against it and secondly the prices have already risen considerably this year. We expect the market to consolidate over the summer.
Potential for value
It is still too early for a comeback of value stocks but the underperformance of these stocks has never been greater than currently. If leading indicators turn positive value stocks have some potential. We are at gunpoint.
Sabre-rattling in the trade conflict
The markets in May were particularly burdened by the disappointment caused by the fruitless talks and the recent escalation of the trade conflict between the USA and China. Even the positive impulses such as the expansion of corporate earnings growth in the first quarter could not improve this situation.
Taking advantage of possible setbacks for buying opportunities
Looking forward offers enough food - for bears and for bulls. Seldom in history was politics so unpredictable and at the same time so influential. Above all there is uncertainty as to what the next Trump tweet might cause. We continue to assume a minimal consensus in the trade conflict and see setbacks as buying opportunities.