The Dax runs out of air

Dhe past rally on the stock markets has taken some strength. The stock market seems to be a bit out of breath. It is noticeable that the Dax in particular is very weak in relation to the American indices Dow Jones and S & P500.

Germany’s best-known stock market index is still in an upward trend in purely chart terms, measured against the moving average of the past 200 trading days, but many experts urge caution. Guilhem Savry from the Swiss asset manager Unigestion, for example, advises “taking your foot off the gas and taking advantage of opportunities after a possible correction”.

To justify his caution, he refers to the declining momentum, the unfavorable seasonality, the deteriorating health situation, the highly concentrated positioning of investors and the American yield curve, which calls into question the current pace of the stock rally. In addition, according to the expert, the shares of the companies that had rallied the most during the recovery fell after the results were announced, despite positive figures for the second quarter. Some investors have apparently cashed in and did not want to expose their portfolio to a second wave of corona.

Rapid recovery in danger

“July was a hot month for the stock market – constant changes of favorites for stocks, falling interest rates and rising gold prices with a weakening US dollar. The current fluctuations in value express the understandable uncertainty of the market participants ”, sums up Thomas Böckelmann from the Euroswitch asset management company. In the eyes of the market expert, this will not change anytime soon: “With the increasing corona infections in the United States and Europe, the feared second wave is becoming more likely”. Then a quick recovery would be off the table again.

“A second Corona low would be psychologically much worse than the first, a disaster,” said market expert Robert Halver from Baaderbank. “If expectations of an end to the Corona Tear Valley are disappointed, the recession could be overwhelming and cause serious damage, both internally and socio-politically,” he adds.

To focus only on the well-known argumentation of the second corona wave would be too easy. Even if there really should be an available vaccine against COVID19 in the fall, this should initially lead to a certain relief rally, but the other (well-known) problems of the stock market remained: the upcoming election of the American president, the widening conflict between China and the United States and maybe a hard Brexit.

Quo vadis America?

In addition, the American labor market is likely to remain unstable until at least the end of the year. Dallas Federal Reserve Bank president Robert Kaplan recently hinted that the year-end unemployment rate could still be nine to ten percent, just marginally below the current eleven percent. For this reason too, the result of the American presidential election will have far-reaching effects on the international financial markets. “Whichever candidate wins, fiscal stimulus will be high on the agenda, including higher spending on America’s crumbling infrastructure. Republicans and Democrats are determined to finally implement the infrastructure package that has been praised for so long, ”said John Weavers, market expert at M&G Investments.

As a result, infrastructure stocks could be worth a look – after all, the need to renovate or build roads, gas lines, or power grids in America had been a big issue even before the pandemic.

There are enough long-term investor topics

Will German investors access it? According to a survey by J.P. Morgan Asset Management, 60 percent of those surveyed would switch banks if they threatened with a “custody fee”. But only around one in ten would use this opportunity and let at least part of their money work on the capital market. Once again, many bank customers should look at the long-term chart of a Dax, S & P500 or a Dow Jones. Over the next ten, 15 or 20 years, equities are still a solid and profitable investment – despite all (corona) crises.

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