Elections and inflation temporarily cause unrest

The unrest ahead of the German parliamentary elections could temporarily depress the German stock market. A clear shift to the left, for example, is likely to cause unease among investors and cause interest rates to rise. Green shares and exposures to Japan appear attractive at the moment.

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 at DJE Kapital AG

Seasonally, September is a rather difficult month, but we remain constructive for the markets and maintain our high equity quotas. We do not expect a bear market triggered by a braking policy of the US Federal Reserve, nor do we expect a strong correction. Cash and, to a large extent, bonds are still no investment alternatives. Regionally, we are currently more optimistic about Japan. In the coming year, the Asian region as a whole could show the highest earnings growth. The German stock market could be temporarily burdened if investors are unsettled by a possible shift to the left. We are watching developments, especially chemical stocks, which could come under pressure in view of the upcoming Bundestag elections. On the other hand, we consider the Japan region and selected green stocks attractive.


  • Higher profit growth in Asia in 2022
  • Japan favourable in terms of profit ratios<
  • Japan currently more attractive than China

Looking ahead to 2022, the Asian region could show the highest profit growth. Asia as a whole is still more burdened by covid-related lockdowns and will therefore only open up more after the US and Europe, which should then benefit the economy and business activity more in 2022. For example, markets such as India could also have greater catch-up potential in the coming year. The Japanese market currently also appears very favourable in terms of earnings ratios - as far as asset valuations are concerned, this has been true for Japan for years. Compared to China, Japan is currently convincing due to its relative undervaluation, higher money supply growth and a better ESG rating. In our view, Japan is currently more attractive than China.


  • Higher inflation environment should persist
  • US interest rates likely to rise somewhat
  • Bundestag election could bring rise in interest rates in Germany

Inflation will remain one of the dominant issues in the capital markets. We expect inflation to remain elevated in the coming months (US > 5%). Recently, US wages and energy and electricity prices have been somewhat worrying. On the other hand, however, credit is becoming less relaxed. Central banks will continue to try to quickly quell inflation fears and thus shape the opinion picture for the time being. Due to the ongoing pandemic situation in the US, we continue to assume that the expected tapering of bond purchases will be postponed. In Europe, a tapering discussion is probably still in the very distant future. Looking ahead to the coming months, US interest rates should tend to rise somewhat. If a left-wing government emerges from the Bundestag elections, this could also cause interest rates to rise in Germany (which could make the insurance sector interesting). We remain short duration.

Market technical

  • Largely neutral
  • But slightly worse compared to the previous month

The market technique is currently neutral, but has worsened somewhat compared to the previous month. The NAAIM indicator1, which measures the investment rates of institutional investors, is currently back at 94% (after 78% at the beginning of August), for example, and the US put-call ratio2 is again in overbought territory. Market breadth has not improved significantly, as can be seen from broad-based indices such as the Russel 20003, which have stagnated since March.


  • Balanced portfolio important
  • German equities, especially chemicals, possibly under pressure
  • Green shares in focus

In principle, we continue to consider a balanced portfolio allocation without strong overweights or underweights to be sensible. Globally, the technology, financials/banking and utilities sectors in particular outperformed in August. In Europe, technology and utilities were the best performers. In general, non-cyclical companies have recently outperformed cyclical ones. In individual regions, we currently consider Japan to be more attractive than China. We are also monitoring German equities, especially chemicals, which could come under pressure in view of the upcoming Bundestag elections. In contrast, selected energy suppliers, which sometimes benefit from the massive increase in electricity prices, or companies active in the field of charging infrastructure could profit from the elections.


  • USD/EUR exchange rate neutral
  • Gold neutral

The market technique for the USD/EUR exchange rate is largely neutral. In general, US dollar shorts have been reduced recently. In our view, a sideways movement of the USD/EUR exchange rate is the most likely scenario. We are also largely neutral on gold, where ETF demand is still not coming back stronger. US investors are even continuing to return their gold ETF holdings. However, the negative real interest rate environment should continue to support gold.

1 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.

2 Put/call ratio = ratio between call and put options. If put options predominate, the prevailing opinion is that this indicates negative market sentiment (stock market sentiment). If, on the other hand, call options predominate, this indicates a positive market sentiment from this point of view. In fact, a rise in prices can often be observed after high put-call ratios. The PCR is therefore considered a contra indicator. It should be noted that under normal conditions fewer put options are demanded than call options; a balanced PCR close to 1 is therefore already considered an indication of slightly negative market sentiment.

3 The Russell 2000 market index is a global stock index for small caps. It lists the 2000 smallest US companies in the Russell 3000 weighted by market capitalisation.

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