Change of favorites on the stock market – Weberbank column

The publications of the latest test results from two vaccine manufacturers recently gave hope in the fight against COVID-19 and had an electrifying effect on investors. Despite this, the coming winter months will be challenging for the population and the economy. You can read in today’s issue of Finanzmarkt aktuell how this ambivalent picture fits together and how we assess the situation on the capital markets.

Light and shadow in the fight against COVID-19

Finally, there is a silver lining – that is what many have thought in the past few days when they heard the news of the success of two large vaccine projects. With a success rate of 90 or 94.5 percent in protection against the disease COVID-19, there are now actually very promising vaccine candidates. So far, the success rate in the tests was around 50 percent, well below this level. Unfortunately we have to dampen the euphoria at this point. Of course, due to the clear limitations of everyday life, the desire to return to normal is enormous. However, it will take some time before the vaccines can be used on a large scale and show initial success. On the one hand, the medical approval is not yet available and further tests have to be carried out. On the other hand, the time and logistical effort involved in vaccinating large parts of the population should not be underestimated. According to experts, with good preparation it will take at least until 2022 to receive broad-based immunization. Until then, the best prevention is to comply with the distance rules that have now been established. In Europe, which was last hit by a violent second wave of pandemics, the first successes of the most recent “lockdowns” are slowly becoming apparent. Countries like France or the Netherlands were able to stop the exponential development of the number of cases by significantly restricting public life. The development is reminiscent of spring and arouses an uneasy feeling about the consequences for the economy. However, we do not expect an economic downturn as at the beginning of the year. Rather, stagnation or a slight decline in the fourth quarter can be assumed. The industry is currently developing relatively stable. Only consumption suffers. The government’s aid programs have a supportive effect. Even if the negotiations for the EU’s 750 billion aid package are currently stalling, the great economic pressure will bring the partners back to the negotiating table and a compromise will be reached in the end. In our opinion, the year 2021 will bring with it a significant economic recovery, despite the current negative effects.

The future is Asian

While we are in the stranglehold of the pandemic in Europe and the US is still debating the future president, Asia is working on the future. As we recently reported, the COVID-19 region is now quite well under control. Politicians thus have leeway to deal with important future issues. A free trade agreement with historic dimensions was signed last weekend. With 14 countries including China and Japan, it comprises around a third of total world trade, which in future is to be largely duty-free and without major trade restrictions. While the USA in particular is struggling with China in the West and has built up new barriers in recent years, the entire Asian region is opening up and committed to the free movement of goods. From a strategic point of view, this opens up enormous economic opportunities for the region. Even without this agreement, Asia was in the process of becoming the world’s most important economic zone by 2030.

It is well known that a look to the future is particularly important for participants in the stock market. So it is not surprising that the news about the COVID-19 vaccine was received positively. The focus was less on the vaccine manufacturers or the previous beneficiaries of the crisis in the technology and consumer sectors. There is currently a radical change in favorites to cyclical companies such as financials, industrial companies or small caps. There was a brief renaissance of these titles in the early summer of this year, but this did not last long. The question is whether this time there is actually a real chance that these companies, which are rather unloved by investors, will experience a sustainable rediscovery? We believe it is time to take a closer look at this investment segment. In the coming year, COVID-19 will have less of an impact on the economy, and we will see a global economic recovery due to stimulus from governments and central banks. In this environment, cyclical stocks should be able to rebound significantly. Investors are advised to review their portfolio statement and gradually adjust it with a view to the coming year. We have been making this adjustment in the mandates we manage since the summer. The current development encourages us to continue to pursue and expand this orientation.

Disclaimer: This text is a column of the Weaver bench. 4investors is not responsible for the content of the column and therefore does not necessarily have to agree with the opinion of the 4investors editorial team. Any liability and claims are therefore expressly excluded by 4investors!


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