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.
Following a positive start to the year, the upward trend continued into February. While the global stock market showed a slight upward trend, the German and European markets performed more dynamically, with Japan recording the strongest monthly performance. The broad U.S. stock market, by contrast, lagged behind, held back by the weaker performance of many U.S. technology stocks.
At the sector level, stocks in the energy, commodities, and utilities sectors were particularly in demand globally in February, while technology, cyclical consumer goods, and financials disappointed. In Europe last month, telecommunications stocks, defensive consumer stocks, and oil and gas stocks were particularly in demand, while media, financial, and technology stocks lagged behind.
Looking ahead to April, the risk-reward profile in the market has deteriorated. Against this backdrop, a more defensive strategy currently appears appropriate. The complex mix of the Iran conflict, the oil crisis, interest rate concerns, and AI semiconductor investments is driving market activity. At this point, it is unclear how long the blockade of the Strait of Hormuz and the hostilities will last. A prolonged conflict is not priced into the markets. Regardless of the Middle East conflict, investments in AI and data center infrastructure remain an important driver for further market development.
Selected tech and AI stocks therefore continue to appear promising. Energy companies are also likely to benefit, as they can expect positive earnings revisions due to higher prices. Regionally, nearby markets are likely to be more severely affected by the war in Iran than the U.S. In the bond market, the focus remains on medium-term maturities.
Opportunities that we see
AI, semiconductor, and data center investments: Relatively independent of the situation in the Middle East, investments by major tech companies are likely to remain largely intact. All hyperscalers are striving for greater capacity and are expanding accordingly. We currently view AI and technology stocks that benefit from these investments as promising.
U.S. Region: The U.S. enjoys greater energy independence than Europe or Asia. It produces most of the oil and gas it needs domestically and also has one of the most modern refinery networks. As a result, the rise in oil and gas prices caused by supply shortages is affecting the U.S. less severely than Europe, Asia, and Japan in particular. In addition, U.S. purchasing managers’ indices are showing very robust performance.
Energy and agricultural stocks: Oil and gas prices have improved since the start of the year. Agricultural prices often follow such trends. Oil stocks, in particular, are likely to see positive earnings revisions in the coming weeks, as the current oil price has not yet been fully priced in.
Risks that we see
Escalation of the geopolitical situation: An ongoing conflict in Iran poses a particular risk. The longer the war in Iran lasts, the more likely energy prices will remain high, which would hurt Europe and Asia economically. In such a scenario, there is also a risk of increasing tensions between the US and China, as China is also heavily dependent on energy supplies from the Middle East. Should it come to that, even production disruptions in Asia due to gas shortages cannot be completely ruled out.
Renewed inflationary pressure: In the past, rises in oil prices have often signaled the start of a period of higher inflation. Since this is an exogenous factor, central banks will likely not seek to offset it through interest rates.
Valuations of selected markets and sectors: Certain markets are trading at the upper end of their historical valuation ranges and do not fully reflect the risks of a prolonged Middle East conflict, with resulting higher inflation rates and lower growth prospects.
Private Equity: Private equity remains highly risky in the current environment. The sector is showing relative weakness and is being impacted by risks from the private credit segment. There are currently signs that it is becoming increasingly difficult to execute successful exits.
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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.