Robert Halver Column: After the stock market carnival comes Lent, but without stocks it is always Ash Wednesday
As a Rhinelander, my carnival DNA is making itself felt these days. It all ends on Ash Wednesday. Does this also apply to the quasi-carnival party in the stock markets? The S&P 500, Nasdaq and Dax recently managed to reach new all-time highs, even though we live in times of crisis.
Repeatedly stable US labor market data is obviously delaying the fantasy of cutting interest rates from becoming a reality. For the president of the Federal Reserve, Jerome Powell, a first interest rate cut in March is already ruled out. And the head of the Federal Reserve is also very reserved about the dates of the next meetings. The fantasy of cutting interest rates for stocks seems different, right? Could it perhaps be just a mirage?
Unfortunately, Germany is not only the sick person of Europe, but of the industrialized countries.
If you look at Germany through economic lenses, you cannot see flourishing landscapes. According to the OECD, among the G20 countries in 2024, only Argentina will have even worse economic prospects.
What needs to be done is not rocket science. Messrs. Scholz, Habeck and Lindner only need to orient themselves on what our competitors are doing or what made Germany so successful in the past. There is an urgent need for a reform of the market economy that boldly addresses our structural deficits: a strict diet of bureaucracy, planning and energy security, but above all, giving freedom to people and allowing them to do what they do rather than imposing even more state economic measures. shackles on them. Unfortunately, these findings (still) bounce off politicians like a storm surge off a northern German dyke. This means that the MS Germania cannot float again, much less keep up with the other speedboats.
About the expert
Robert Halver is head of capital market analysis at Baader Bank.
Also, unfortunately China is no longer our free lunch option. In the land of smiles, consumers and companies have stopped laughing. After years of continuous growth, economic difficulties are being felt there for the first time. This is also being felt by the order books of the German export industry. In any case, China no longer needs industrial Germany in many areas. And that's supposed to be what drives fundamentally good sentiment in German stocks?
Trump is Lent personified for Europe
There are also more and more rebounds coming from the geopolitical side. We can no longer talk about peace in the world. Anyone who watches the news at night needs to have thick skin. Many investors are also concerned that Trump will turn the transatlantic alliance to the left in a second term. Selfish protectionism and a dirty, anti-European deal between the US president and Putin to end the war in Ukraine are seen as a major danger.
Do these really stable conditions put stock markets in a good mood? Doesn't the great disappointment have to come soon?
You reach the oasis of interest rate cuts
Yes, there is no reason to trivialize the risks, but there is also no reason to ignore the opportunities. Because the trend toward disinflation continues in the United States. And a US economy dependent on credit drugs desperately needs new material in the form of low interest rates. Financial markets therefore expect the first of five interest rate cuts by the end of the year in May.
In general, it's not just about the price, but also the amount of money. To avoid liquidity bottlenecks at regional banks suffering from the commercial real estate crisis, the Federal Reserve is expected to throttle liquidity repatriation. And low-interest liquidity has always been a lubricant for stocks.
As soon as the Federal Reserve gives the green light to cut interest rates, the spell will be broken and the ECB will be happy to join in. Due to Europe's enormous structural deficits, the motto follows: “Patron of goodness, protect us at all times.”
The global economy is recovering, albeit slowly
The CCP in China is currently pursuing a rescue strategy similar to that of its class enemies the United States and Europe after their real estate and debt crises. Positive effects for the global economy can be expected from the second half of the year. And in the United States, interest rate cuts will increase financial flexibility for consumers and businesses. Furthermore, the huge global spending on defense, infrastructure and digitalization is acting as a special boom. Overall, economic expectations are rising around the world. Unfortunately, Germany is a lost country in comparison.
However, the global economic improvement is benefiting export-sensitive German industrial companies, which have long become cosmopolitan and are therefore escaping location disadvantages at home.
The stock market isn't about whether you want to have a beer or play golf with Trump
In fact, German companies are increasingly seeking their fortune in the United States due to the clear advantages of its location. These will be even higher due to Trump's planned economic relief and tax cuts. Your benefits and price quotes in Germany will be delighted. Furthermore, historically significant valuation discounts compared to US stocks give German stocks additional upside. In general, stock markets pay little attention to moral issues.
And as for Trump's attacks on Europe: finally do something about it in Brussels and Berlin and strengthen the home front. You can only change yourself, not others.
It seems the stock market will only be in trouble for a short time.
Let's not forget the megathemes either. In the high-tech field, there is no need to worry about stocks that make money with AI. These stocks can also withstand delays in interest rate cuts. The main thing is that they come. And basically, there is always a new “pig on the ground” being chased, see for example the issue of weight loss injections.
Depending on the news situation, for example in relation to inflation data and central bank statements, there may be a temporary drop in the stock market, which is healthy by the way. However, due to the overall positive market assessment, these should be used for acquisitions. Thanks to the professionalism of large investors and also algorithms, adjustments now occur quickly, like cleansing storms, which are then replaced by a gentle glow. “It would still be nice,” says the Rhinelander.
Dear investors, no one can do without Lent after Carnival. But we shareholders know it very well: without shares, the whole year is Ash Wednesday.
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