Pricing power makes the difference

The global economy should continue to develop well, and the profit forecasts of some companies could even be exceeded. Due to rising producer prices, the focus is increasingly on companies that have strong pricing power. Rising inflation rates are eating away at the mini- or minus interest rates on government securities.

The authors

DJE's team of analysts monitors and evaluates the markets on an ongoing basis using the in-house FMM method according to fundamental, monetary and market criteria. They summarise their findings once a month.

From the analyst team of DJE Kapital AG

Historically, July is a good month for the stock market. As in previous months, we remain constructive for the markets and believe further price increases are possible in the current month. The market technique is currently largely neutral, but not as good as last month. There is no need to worry about the economy in view of the development in the second half of the year; corporate earnings should continue to develop well. We must continue to keep an eye on inflation and interest rates. In general, we should continue to see a higher inflation environment and thus higher interest rates again. In the autumn, the "tapering" discussion, i.e. the discussion about reducing bond purchases, could gain momentum again in the USA and thus bring about an autumn correction. However, we do not expect a bear market triggered by a braking policy of the US Federal Reserve. Real interest rates (interest rates minus inflation) have recently fallen further in the USA and Europe and should remain negative in the coming months, which in turn is positive for equities and real assets. Cash and, to a large extent, bonds are no investment alternatives, which is why we are maintaining our high equity quotas.



  • No worries about the economy in the 2nd half of the year
  • Focus on companies with high pricing power

The global economy continues to perform well. In the second quarter, earnings development should be good for most large listed companies. We also think it is possible that some companies will raise their forecasts. Producer prices are likely to remain at a very high level in the coming months. We are therefore focusing on companies with high pricing power1. For the time being, there is no relief in sight for logistics costs: container freight rates and air freight prices should remain at high levels for several more months. There is still no overcapacity in many areas; on the contrary, many products are currently still in short supply.



  • Higher inflation environment should persist
  • Interest rates should rise again somewhat in the medium term

The inflation trend will remain one of the dominant issues on the capital markets. We expect inflation to remain elevated in the coming months (USA: 4-5%). The inflation trend will probably stimulate the "tapering" discussion in the USA. A less expansive Fed policy could be the consequence, which could then temporarily weigh on the markets in autumn. An autumn correction can therefore not be ruled out. However, we do not expect a stronger Fed policy or a bear market on the stock market. The policy of the European Central Bank, on the other hand, is likely to remain expansive. In Europe, a tightening discussion is probably still a long way off. Despite the high inflation figures, US interest rates have even fallen recently. This is due to the massive bond purchases by the US Federal Reserve and US commercial banks as well as short covering by professional investors. Looking ahead to the coming months, however, slightly rising interest rates seem realistic again. We are therefore sticking with a short duration.


Market technical

  • Currently largely neutral overall

Overall, the market indicators have deteriorated in the past four weeks. For example, the NAAIM2 indicator, which measures the investment rates of institutional investors, is currently back at 92% (after 68% at the beginning of June). The market breadth of the USA as measured by the A-D line3 deteriorated in June, the upward movement was mainly driven by stocks with a high weighting in the index. On the positive side, however, there are currently very few future long positions on the S&P 500 and "upward trends often continue longer than you think."



  • In general, we continue to look for balanced portfolios
  • Reduce technology and healthcare underweights, reduce chemical overweights


We continue to recommend a balanced portfolio allocation and no strong overweights or underweights. Globally, the technology and healthcare sectors in particular outperformed in June. In contrast, sector performance was more balanced throughout the first half of the year. We reduce the underweights in the technology and healthcare sectors and lower the larger overweight in the chemicals sector to reduce risk.




  • Stronger US dollar likely in the medium term
  • Gold currently supported from a sentiment perspective

From today's perspective, a stronger US dollar seems likely in the medium term. From a sentiment perspective, the US dollar (many US dollar shorts) currently appears well supported. Gold should continue to be supported in the longer term by the negative real interest rate environment; the current negative sentiment could also help in the short term.



1 Companies with high pricing power are those with strong brands, such as the iPhone giant Apple, or those that have occupied a strong market position, such as the software manufacturer Microsoft or the online retail giant Amazon.

2 NAAIM (National Association of Active Investment Managers): The NAAIM exposure index tracks the average exposure of its members to the US equity markets. The NAAIM index is not forward-looking, but provides insight into the actual adjustments that active risk managers have made to client accounts over the past two weeks.

3 AD line (Advance Decline line): Market breadth indicator that shows whether more stocks are rising or falling. In order to make a statement about the health of the broad market, market breadth indicators are sometimes better suited than a stock index. Especially in the case of trend reversals (top and bottom formations), the "classic" stock indices are rather sluggish. This means that if, for example, a new bear market emerges and a large number of shares have already fallen sharply, this is only recognisable in the index at a rather late stage.

Note: All information published is for your information only and does not constitute investment advice or other recommendation. Long-term experience and awards do not guarantee investment success. Securities are subject to market-related price fluctuations which may not be compensated for by the active management of the asset manager or investment advisor. This information cannot replace a consultation. All information has been provided with care and to the best of our knowledge at the time of preparation. Despite all due care, the data may have changed in the meantime. Further information on opportunities and risks can be found on the website The sales prospectus and further information are available free of charge in German from DJE Investment S.A. or at The fund management company is DJE Investment S.A. DJE Kapital AG is the distribution agent.