The authors: DJE's strategy team monitors and evaluates the markets on an ongoing basis using the in-house FMM method according to fundamental, monetary and market-technical criteria.
After a positive start to the year in January and February, there was a sharper decline on the global capital markets in March. This was triggered by the war between the USA/Israel and Iran and the resulting rise in energy prices due to the closure of the Strait of Hormuz.
While the global stock market corrected noticeably, the markets in Germany, Europe and Japan came under even greater pressure. By contrast, the correction in US equities was much less pronounced. The reason for this is the high dependence of Asia and Europe on energy imports from the Middle East.
At sector level, stocks from the oil and gas industry were particularly in demand in March, both globally and in Europe. Utility stocks also performed above average, while industrial, commodity, real estate and consumer stocks came under heavy pressure.
Looking ahead to the coming days, the risk/reward profile has improved in the short term. The feared worst-case scenario of a massive attack on Iran's energy infrastructure by the USA and Israel has failed to materialize. Looking ahead to the coming months, however, geopolitical uncertainty is likely to persist. Energy prices in particular could initially remain at a relatively high level, putting pressure on the global economy.
Irrespective of war developments, investment in AI and data center infrastructure is likely to continue. Selected tech, AI, industrial and energy supplier stocks therefore remain promising. The energy sector could also develop positively due to upcoming earnings revisions. Regionally, the USA offers potential for the coming months as it is less affected by the Middle East conflict than Asia and Europe. In the bond segment, medium maturities remain promising.
Opportunities we see:
Temporary, market-driven recovery of the overall market: the conflict in the Middle East could ease further in the short term and lead to a recovery due to the very negative sentiment on the market and the cautious positioning of many investors.
AI, semiconductor and data center investments: The investment volumes of the major technology stocks will develop relatively independently of the situation in the Middle East. All hyperscalers are striving for greater capacities and therefore tend to invest further. AI and technology stocks that benefit from these investments can currently be regarded as promising.
Technology sector as a whole: The valuation premium of the major tech stocks compared to their respective indices no longer exists. Measured against this benchmark, they are at a level last seen in 2021. The reason for this was the corrections, which have recently been significantly higher for the "Magnificent 7" than for the indices.
USA region: The USA enjoys greater energy independence than Europe or Asia, for example. It produces most of the oil and gas it needs itself and also has one of the most modern refinery networks. The rise in oil and gas prices due to the shortage is therefore hitting the USA less severely than Europe, Asia and Japan. In addition, the US purchasing managers' indices are developing very robustly.
Banking sector: The yield curves have recently shifted upwards and the yield curve could remain steeper for longer. In the absence of a recession, this is a good environment for banks. The upheavals in the private equity environment, which are considered a risk for banks, are not classified as a major risk by J.P. Morgan CEO Jamie Dimon.
Risks we are monitoring:
Geopolitical uncertainty: the final outcome of the negotiations between the US and Iran is uncertain and therefore remains a risk. Both the USA and Iran are likely to enter the negotiations with maximum demands, which means that a resurgence of the conflict cannot be ruled out.
Weakening global economy: Oil, gas and energy prices are likely to remain at a high level in the coming months, partly due to logistics problems and destroyed capacities. Accordingly, the availability of energy and energy sources is likely to remain a problem for some time to come and impact global economic development. The outlook from companies during the first quarter reporting season could also be disappointing.
Private equity: The private equity asset class is highly risky in the current environment. The sector is showing relative weakness and is influenced by risks from the private credit segment. It is currently becoming increasingly difficult to implement successful exits.
Consumer sector: Consumer spending is expected to remain under pressure due to higher energy costs. The Staples sector continues to perform weakly in relative terms.
Planned IPOs : Various large new issues are expected for the current year. There have recently been increasing indications of an IPO by SpaceX, for example. These issues could withdraw a large amount of liquidity from the market.
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Marketing advertisement: All information published here is for your information only and does not constitute investment advice or any other recommendation. The statements contained in this document reflect the current assessment of DJE Kapital AG. These may change at any time without prior notice. All statements made have been made with care in accordance with the state of knowledge at the time of preparation. However, no guarantee and no liability can be assumed for the correctness and completeness.