First half year expected to be better
Lower energy prices are currently having a moderating effect on inflation, and China's departure from the zero-covid strategy is providing relief in the markets, but especially among China's major trading partners. Thus, the first half of 2023 could turn out better than many expect. However, if core inflation (excluding energy and food) does not fall as well, policy rates are also unlikely to fall as quickly as many are hoping, and the second half of the year may be worse than the first.
Unsettled end of the year
Both the stock and bond markets came under pressure again in December. Rising key interest rates in the USA and the euro area depressed prices on the stock exchanges and caused bond yields to rise further. In addition, the abrupt departure from the zero-covid strategy in China surprised the majority of market participants.
Falling inflation provides relief
The stock markets were also able to recover in November. The main source of relief was lower inflation on both sides of the Atlantic. As a result, the markets expected less aggressive interest rate hikes by the central banks.
Renewable energies with opportunities
Even though the stock markets recovered in October because inflation in the USA declined and the energy crisis in Europe eased temporarily, the global economy is likely to remain under pressure in November and the coming months. It remains important for companies to keep an eye on their cost structure. Opportunities could arise in renewable energies.
Market participants' hopes for a less aggressive monetary policy by central banks and a warm October, which caused the price of gas to drop significantly, caused stock markets in the USA and Europe to soar. In addition, the German economy did not shrink as expected in the third quarter, but expanded, which gave the DAX an additional boost.
Reduce equity risks - exploit selective opportunities
Inflation, rising interest rates, hawkish central banks and ongoing energy crisis in Europe sent the stock markets into the basement in September. In October we expect a short-term recovery on the markets.
Acting from the defensive
The second half of August was difficult for the stock markets. This was mainly due to the worsening of the energy crisis and the central banks' priority to fight inflation rather than growth and the labour market. We expect September to be another difficult month, especially for European equities and German government bonds.
Priority for price stability
Central banks set the tone in August: as the US Federal Reserve announced that it would prioritise price stability over growth and the labour market, market participants braced themselves for further rate hikes and stock markets in the US and Europe fell.
Companies report good figures
In July, most equity markets recovered some ground from the losses of the previous months. The recovery is likely to be primarily due to the start of the second quarter 2022 reporting season, which has so far been better than expected on both sides of the Atlantic.
Light summer freshness on the stock markets
After a first half-year marked by inflation, the threat of recession and the ongoing Russia-Ukraine war, markets recovered somewhat in July. The US equity market continues to offer the better risk-reward ratio. And profitable companies are the trump card.
Bonds - Renaissance of a currently undervalued asset class?
For years, bonds were outshone by equities. But the recent turnaround in monetary policy in the US and Europe, as well as the geopolitical situation, are weighing on equity prices. Adding to this are persistently high inflation and uncertainties with regard to the pandemic, as for example in China.
Pressure from two sides
In June, the US Federal Reserve raised key interest rates by 75 basis points to combat rampant inflation in the US. In Europe, too, the European Central announced a departure from its zero interest rate monetary policy. High inflation also weighed on consumer sentiment and the mood of purchasing managers.
Gas shortage threatens production
A sword of Damocles hangs over German and, to some extent, European industrial production. If Russian gas is no longer supplied, there is a risk of further price losses. The US stock market currently offers a better risk-reward ratio. In addition, selected bonds offer opportunities with manageable maturities.
Prudent monetary policy good for stock markets
Concerns about growth override those about inflation. In this environment, hopes are rising for a more moderate monetary policy by the US Federal Reserve. In Europe, on the other hand, the interest rate turnaround is still pending. Monetary policy on autopilot is likely to hurt the stock markets, but a sense of proportion would be beneficial.
Profitability is the key
In the past years, investors mainly paid attention to criteria such as sales growth. This is very likely to change. Profitable companies with strong market positions, which can pass on prices and maintain margins, will be ahead in the future, in our view.
The war in Ukraine, persistently high energy prices, strained global supply chains and rising inflation weighed on the stock markets in April. The high interest rate expectations also put pressure on the stock markets and, moreover, on the bond markets.
The Cards Are Being Reshuffled
Rising inflation rates, rising interest rates and ongoing geopolitical tensions are forcing investors to rethink. A paradigm shift is taking place in the valuation of shares: Factors such as profitability and market position are becoming more important than sales growth.
Unexpectedly strong resistance
In March, the stock markets initially continued their downward trend, but were then able to catch up significantly. This was the stock markets' reaction to, among other things, Ukraine's unexpectedly strong resistance to the Russian army. At the same time, the need for action by central banks grew in view of the further increase in inflation.
Consequences for cost of living, agricultural as well as commodity markets - questions and answers
Russia's war in Ukraine in addition to all the human suffering is causing major global economic challenges - especially noticeable with regard to energy, commodity and agricultural prices. An overview for investors and consumers.