Markets

Halver’s market assessment: “Happy days are here again” …

… people always like to sing in America when crises or risks subside. And two equity risks are becoming less important on the stock markets. The US is getting a president who no longer sees geo and trade policy as just a battle arena. Last but not least, an effective corona vaccine is apparently about to be approved, which nourishes the chances of a medium-term reduction of the economically damaging lockdowns. That’s good prospect for stocks, isn’t it?

Show time for Joe, Golf time for Donald

With Joe Biden, confidence in US foreign and trade policy returns. The incumbent will work hard on the legend that he only lost because of electoral fraud. Hopefully the Republican Party will prevent its eventual scorched earth policy. In extreme cases, this could also lead to irritation in the markets. Basically, however, Trump’s days are numbered. On the stock exchange he is already the “future ex-president”.

America urgently needs another stimulus package. But what about its political enforceability? While the Democrats maintain their majority in the House of Representatives, the final distribution of power in the Senate, which is subject to voting, is still questionable until the runoff elections in Georgia in January. A triple in all three power-relevant institutions would offer the democrats the opportunity to rule through consistently in terms of economic policy.

Democratic Trinity would be viewed with skepticism in the financial markets. They fear that in this case, Elizabeth Warren and Bernie Sanders, popular with Democrats, will gain influence. Both make no secret of their preference for “left”, state-controlled economic policy. Should they – to reconcile the split democratic party – even get prominent ministerial posts, there is a risk of significantly higher corporate taxes and massive industry regulations. That’s not what equity dreams are made of.

The stock exchange would prefer a power split with a Senate that remains republican as a market-based corrective. However, this scenario again has the flaw that it comes to a gridlock, to a standstill in political operations. Mud fights are nothing unusual for either party. Then Biden, as a fisherman of men, would be asked to find compromises. If larger stimulus packages are agreed to compensate for less state economic exuberance, the financial markets would be happy.

Until it even comes to that, the political volatility can also affect the stock markets.

The emerging markets would have chosen Biden

China is not very pleased with Biden’s election victory. The enemy image is losing strength. A further geopolitical split by the USA, especially the Western alliance, would have given Beijing more opportunities to strategically influence. An America that is ending its retreat into isolation and back on the world stage complicates this strategy. In general, since the free world is stuck together again, some other authoritarian governments suddenly seem to have been chalked up. OK then!

Basically, the pressure on China to work with America is increasing. And Biden, too, has no objection to peaceful coexistence with China if it significantly cuts back on its unfair trade practices. If, instead of confrontation, cooperation is the order of the day, and instead of a trade war, there is more global economic potential, this represents a great opportunity for the equity markets of the emerging countries. Investors’ risk aversion to them is decreasing. In fact, they are all showing upward movements. After the first general euphoria, however, the wheat will quickly separate from the chaff. The Asians must be given clear priority over South America. They are significantly more innovative, more competitive and do not rest on natural resources.

Europe must use the Biden time window for itself

Europe, which is clearly having trouble organizing itself properly without the American leader, is looking forward to more transatlantic cooperation in the future and, with a view to its export values, less protectionism. By the way, with the election of the EU-phobic Trump, British Prime Minister Johnson can no longer hope for a British-friendly trade deal with America. This gives room to hope that London will still rely on deal and not no deal Brexit to prevent major economic downturns. Europe would be spared a chaotic breakdown of supply chains and trade flows.

However, no porridge will rain from the transatlantic sky for Europe. Biden-America only thinks of one thing: of itself. And nothing reconciles the divided states of America as much as economic perspectives. Biden will therefore rely on “Buy American” and production at home, not abroad. Even the Democrats are not unlimited do-gooders. You don’t fight with the sword, but the foil is definitely used. And so there is the performance of increased transatlantic compassion by the US only for trade, defense and geopolitical considerations. Last but not least, Biden wants us to take the American side in the US-Chinese dispute. After all, the new US administration wants negotiated solutions, not public humiliations.

Nevertheless, Europe must use the time window of Biden’s policy of détente to finally stand on its own two feet. Who knows who will become US President in 2024. Or do we want to pray every four years that only a Europe-friendly president will be elected who will relieve us of as much geopolitical, economic and commercial dirty work as possible?

Europe’s idleness must end. We have to grow up, put weight on the global scales ourselves. Even if it is difficult, it is about cohesion, innovation policy and competitiveness. After the Second World War, Germany did not become a leading industrial nation with political prayers and a state economy. In this context, the economic opportunities of the megatopic climate protection must be used instead of just having ideological debates. China and America will brutally take on this issue in order to take it away from us as much as possible. The most generous monetary policy of the ECB and the distribution of monetary gifts to maintain European friendship are no substitute for reform policy.

If Europe fails to turn around, that doesn’t mean that European stocks won’t rise. But their long underperformance compared to the American competition continues.

Unfortunately, Europe’s lack of innovation is also reflected in the underperformance of the TecDAX compared to the US technology index Nasdaq Composite.

Light at the end of the dark lockdown tunnel?

Obviously, the Mainz-based company BioNTech, in cooperation with the US pharmaceutical company Pfizer, has succeeded in developing a vaccine that reduces the risk of infection with Covid-19 by around 90 percent. This is a great medical breakthrough. And it would also be a game changer for the global economy, which would be relieved of its greatest handicap.

Still, you have to be aware of reality. Many questions are still open. When is e.g. the vaccine specifically before and especially when a satisfactory vaccination coverage can be expected, which makes lockdowns unnecessary. If there are delays here, there is potential for economic disappointment with diversification across the stock markets. RKI boss Wieler speaks of “pinching your buttocks together for a few more months”.

In any case, the economic recovery is taking a break in winter because of the second corona wave. And the uncertainty affecting the (economic) psyche as to whether there will be further restrictions or when will be relaxed again makes things more difficult. The Ifo business and ZEW economic expectations also point to a slowdown in growth.

From today’s point of view, however, the view into the future is positive if the politicians worldwide prevent the “lockdown”. Overall, in view of the economic stimulus measures that have been taken and the pacification of the trade war, a strong second economic half-year is expected in 2021. The Federal Ministry of Finance has already indicated that in extreme cases there will be further economic stimulus programs. No party wants to allow itself an open economic flank before the federal election.

Export Germany is benefiting from the recovery of the Asian economy, in which Corona has apparently lost its horror. The Chinese purchasing managers’ index of the business magazine “Caixin” is clearly in the expansion area and at a multi-year high.

Market situation – market breadth is increasing and making stocks more stable

With Joe Biden as US President and the prospect of a vaccine, there is less of a need for safety. This can be seen in gold and especially in bond yields, which are rising again.

Initially, however, there is no reason to worry that the central banks will allow interest rates to rise unhindered. They will not stand in the way of sustainable economic stabilization and the smooth management of apocalyptic debt. In addition, rising yields should not result in strong currencies. Today every country wants to be an export nation. The ECB’s announcements, which warn of recessive dangers and thus create the necessary alibis for even more monetary policy opulence, also speak in favor of this scenario. Overall, the stock market does not lose its body and stomach argument “liquidity boom”.

The foreseeable easing of tension in the trade war and at least the vaccine-based prospect of lockdown easing are giving momentum again to cyclical stocks. High tech values ​​are no longer unique.

At the same time, value investors breathe a sigh of relief, who have been behind Growth since 2017. Substantial stocks could not keep up with the growth stocks, especially from the IT warehouse. But with the economic thaw, their hearts are warm again.

Last but not least, another mega-topic promises to bring momentum to the stock market. If America under Biden also says goodbye to the fossil fuel era and dedicates itself to climate and environmental protection, things will also take off on the stock markets. Then stocks from the alternative energy sector will also make up ground against high-tech. The same applies to stocks that meet the so-called ESG criteria (environmental, social, governance, i.e. environmental, social and good corporate governance). If these are promoted more and more by the state, as in the EU, there is no way around them. By the way, these stocks can also be found mainly in the value warehouse.

IT certainly still has valid business models. And the sector will not be crushed by the Biden administration either. Because IT guarantees the USA technological defense capability against China. No lion willingly let its teeth and claws be pulled. But the share engine no longer runs on just one cylinder. It runs quieter and therefore more stable.

Sentiment and chart technique DAX – consolidating in the short term, positive in the medium term

The US election and vaccine fantasy have led to euphoria in the stock market, which has now calmed down.

America is currently a “lame duck”. Decisions about a necessary, new and large stimulus package will not be made until the beginning of next year. Since, at the same time, sufficient vaccination coverage of the population is not expected before mid to late 2021, disappointments in terms of lockdown loosening should be taken into account in the meantime.

But the equity outlook is stable. Due to the brighter news situation, the willingness to take risks in the financial markets has fundamentally increased. A small year-end rally is possible.

In terms of the chart, the first supports are at 12,960, 12,671 and 12,370 points. If the index rebounds, it will encounter resistance at 13,240, 13,300, 13,500 and 13,689.

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