Country among the stock exchanges in Europe. The corona crisis is back with force and the fluctuations in the markets are increasing. In the spring, the cascade really got going when funds adjusted their risk parameters and, when panic began, took out cover. That intensified the wave and we are beginning to see something like that even now. No question about it, the fear of a Corona Crash 2.0 is currently causing a lot of nervousness again. “Investors are currently getting out of euro stocks in particular, because the current environment is extremely unfavorable for economically sensitive indices such as the Dax,” says Gil Shapira, chief strategist at the broker Etoro. At the same time, the Dax has only given a third of its gains since March. A normal correction to the rally – so far.
A lot is currently coming together: The coronavirus pandemic is spreading more and more across Europe, and a new lockdown is becoming more and more likely, especially in France, one of the most important European economies. In addition, there is uncertainty about the outcome of the US election and a weak balance sheet season for American companies, which is picking up speed this week and could become a problem. The disappointing outlook from Microsoft is representative of the development so far in the past quarter.
“The analysts’ expectations were easily exceeded in this quarter because the forecasts during the Corona crisis had been revised downwards significantly,” says Carlo Alberto de Casa, chief analyst at the British broker Activtrades. “But as with numerous other companies – SAP was the most recent example in Germany – Microsoft was unable to give a positive forecast for future corporate development,” added de Casa. In contrast to SAP, which was punished with a price drop of more than 20 percent according to a similar prediction, the Microsoft share gave only a little.
US stocks are more resilient to crises
Around two thirds of the major indices around the world are still maintaining their much-noticed 200-day line. In Europe, however, the situation looks different: on the stock exchanges in Frankfurt, Paris, Madrid and Vienna, the majority of shares fell below the average, the Eurostoxx 50 shows a discount of a good four percent. Many rule-based systems are therefore opting out.
The situation in the USA is different. Wall Street is still benefiting from the continued strength of the highly weighted FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). The Dow Jones has a cushion of five percent compared to the 200-day average, the Nasdaq 100 even 17 percent. The number of stocks with new 52-week lows has also risen only slightly so far.
Will the situation calm down soon?
US investors are currently betting on a significant decrease in nervousness in the future. The “VIX” as a fear barometer on the S&P 500 has risen sharply recently – also because of the upcoming US election. In the next few months, however, the professionals expect a slowdown from currently 36 to below 30 at the turn of the year.
From a technical point of view, the situation is therefore clear: Risk positions such as those on the European stock market are being reduced, the capital is still flowing into the highly liquid US technology giants and thus the corona winners such as Amazon or JD.com. Only when this trend comes to an end will there be a risk of greater losses in the USA as well.
For investors, however, there is above all one piece of advice that can be implemented in your portfolio with professional help: keep a cool head on stressful days, gradually build up positions and not reduce them, and lay the foundation for a successful portfolio in 2021 and beyond. As you could already do in March. The volatility is a great clock. The lower it is, the more likely you are to take risk out of it. The higher it is listed, the braver you can be. True to the motto – be brave when others are afraid and be afraid when euphoria spreads.
Daniel Saurenz runs the Feingold Research exchange portal with his team. It offers a daily market letter that you can test free of charge for 14 days. Sign in at Info@feingold-research.com or try the stock exchange service under this one link out. Training days and coachings can be found NEW under feingold-academy.com