Halver’s market assessment: market year 2021: Lots of questions, but also lots of exclamation marks – columns

After a mini-recession in winter, the growth forces then become stronger. With the increasing wave of vaccinations, the “path of economic liberation” is being taken more and more, with further generous economic aid having an accelerating effect. In addition to this fundamental underpinning, shares benefit from more stable geopolitical and trade policy conditions through Joe Biden. Last but not least, the central banks remain loyal friends of stocks. Overall, 2021 will be a solid year for stocks.

Economy: First a little worse, before it gets significantly better

Basically, vaccines are an economic game changer. But it will take until the middle of next year for a satisfactory vaccination to be achieved. Until then, it would certainly stabilize the psychology of consumers and investors if politicians were to draft an unmistakable and uniform national overall concept with simple rules such as “Don’t get upset”. Above all, the grueling lockdown of the Stop and Go brand must end.

Basically, the global recession is being shortened with lush economic stimulus programs. In America, Ms. Yellen is something of the rock star among economic policy makers. Even at the head of the Fed, she pursued a clearly business-friendly monetary policy. By the way, she is just as assertive as she is persuasive. She always paid attention to a good relationship with both political camps. It will use this balance – depending on the majority in the Senate after the runoff elections in Georgia in January – in the sense of a charm offensive in order to implement the most lavish state aid possible.

The stock market pays for this future, specifically that the world economy will grow significantly over the course of the year.

Joe Biden brings calm to the geopolitical and commercial box

The new US President Joe Biden has promised more geopolitical and trade policy calm for the financial markets. Biden has no objection to peaceful coexistence with China if it ends its unfair trade policy. But since America needs an enemy image, sunshine will never rule. After all, more cooperation instead of confrontation also offers more global economic potential and thus “fundamental fodder” for the stock exchanges.

Europe in particular benefits from this, as it is obviously struggling without American flank protection. However, the achievement of an increased transatlantic sense of unity is only possible for trade and defense policy considerations. Biden wants us to take his side in the US-China dispute. We will submit as much as possible. However, Europe must use the time window of Biden’s policy of détente to finally stand on its own two feet. Who knows whether a new or even old populist will be boss in the White House in 2024. Rest does not count.

It is still unclear whether there will be a deal or no deal in the Brexit negotiations. In the end, a typically European, “dirty” compromise can be expected. Either way, however, the Brexit question has lost its importance compared to the mega-topics corona, vaccines, global economy and monetary policy. This also shows that the United Kingdom is no longer a world power.

Industrial metals as kings in the raw material kingdom

Industrial metals benefit from the global economic prospects. Even the global one

They benefit from decarbonization. Highly conductive and easy to process metals are used to produce emission-free generators, motors and computer chips. In addition to nickel and aluminum, the focus is on copper.

Silver is also needed for the alternative energy supply. The white metal is indispensable for solar panels, sensors in wind turbines as well as in all of e-mobility and when setting up the 5G network. In extreme cases, there could even be an excess demand that would breathe life into the silver price as much as it did in 2011, when it rose to almost $ 50.

But you don’t have to worry about gold either. The geopolitical uncertainty is decreasing. However, over-indebtedness and negative interest rates are sustainable price drivers. In addition, the diversification policy of the central banks holds out e.g. Russia or China in the most real capitalistic of all fixed assets continues unabated in order to alleviate the dependence on US government securities.

Cryptocurrencies are not a flash in the pan, but very wild

Since the Bitcoin is a rare commodity compared to money that can be increased at will, it is increasingly valued as a stability investment. But he is also escaping his exotic corner operationally. Its commercial use continues to expand. In this respect, it is lined twice and has little in common with the formation of bubbles as it was during the time of the Neuer Markt. New all-time highs are therefore possible in the next year, if only because there is enough liquidity for every type of investment.

But it is not a substitute for gold or even stocks. Even he is not immune from heavy losses. In our Fomo world (fear of missing out, i.e. fear of not being there), mega-bulls can become bears again in no time. When vaccines have an economic effect, voracious hedge funds will head off like locusts to the next investment, the stock plantation. Those who can withstand the volatility should devote themselves to crypto currencies with joy. For classic investors, however, the less volatile gold remains the first choice.

Risk of rising inflation and returns?

The fact that investors are already thinking of the economic recovery after Corona is also reflected in the absolute valuations of American industrial stocks, which are given high advance praise. The valuation advantage of US Treasuries is still so great that stocks retain their relative undervaluation.

But what if bond yields rise significantly due to the global economic recovery and inflation, as is currently suggested by the outperformance of cyclical copper compared to gold as a security asset? Theoretically, the valuation advantage of stocks would then be lost. The market would consolidate.

In practice, however, the US Federal Reserve has clearly signaled that it will buy up further government debt to finance economic stimulus packages, which basically keeps the rise in yields in check.

With the ECB, it’s Christmas all year round

In the eurozone, low-interest government financing for economic recovery and the green restructuring of the economy will take on even more massive proportions. Monetary and financial policy have merged in a friendly way, so to speak. Even in Portugal, interest rates have now been abolished.

Inflation will also accelerate in the euro zone. But as in the USA, a new inflation doctrine tolerates longer-term price increases above two percent, since it was previously below that for a long time. With this rubber paragraph, interest rate hikes are postponed indefinitely.

Of course, the central bankers know that borrowing from the euro countries would lead to a fatal debt crisis without massive support from the ECB. Incidentally, the ECB is happy about inflation: a price increase that is above the lending rate eats up national debt as if by magic. America has it e.g. always done that way with his war debts.

With its low-interest doping, the ECB is also fighting the euro appreciation for the benefit of the export economy. Because with Biden’s policy of détente, the US dollar is no longer the safe haven we are looking for. It loses against the euro. The interim “euro peace”, the reconciliation of the core states with the periphery via monetary gifts, has recently given the euro a general boost.

Overall, the previous interest rate advantage for stocks will not be a disadvantage.

Equity markets in comparison – America and Asia are fundamentally more convincing than Europe

While America shows itself to be a hegemon that makes economic policy decisions with a clear vision, Europe suffers from permanent political disharmony, chronic reluctance to reform and ultimately weak competition. And in Germany, no major economic policy decisions will be made before the federal and state elections in 2021.

Europe’s (economic) political idleness must come to an end. The economic opportunities of climate protection must also be used. Otherwise America and China occupy this future topic. Even the most generous liquidity policy of the ECB and the distribution of monetary gifts to maintain European friendship are no substitute for a sustainable economic policy.

Overall, unfortunately, Europe is doing the opposite of what America is doing. The stock exchange cannot draw any economic nectar from this. You cannot score points only with debates on morality or tax increases and justice. That doesn’t mean that European stocks won’t rise. But there is little to suggest an end to the long underperformance compared to the American competition. After all, the German stock market is benefiting from its export fantasy.

In 2021, the Asian emerging markets will continue to develop positively economically. The good old industrial motto of a well-known car manufacturer, “Vorsprung durch Technik”, which once made Germany great, now makes Asia great. With its central star China, Asia is currently the world’s strongest growth engine. In the longer term, the Asian free trade agreement RCEP, which comprises a third of world trade volume, will ensure even more economic strength. Since the emerging countries are heavily indebted in US dollars, the weakening of the dollar’s strength will also help them. Overall, the Asian stock markets, which in 2020 did not underperform but outperform the industrialized countries, continue. In contrast, Latin America falls significantly in comparison.

Industries: All eyes are no longer focused on high-tech

Improved earnings prospects are giving American cyclicals new fundamental momentum versus defensive stocks.

This cyclical upswing is also evident in Europe, especially in automobiles, industry and chemistry. What is remarkable is the fundamental recovery among banks, which should actually suffer from increasing insolvencies as a lagging indicator of the recession. On the one hand, however, they will benefit from better lending business in the wake of the economic recovery. In addition, the market assumes that the ECB will prevent a new banking crisis with all its collateral damage. A “Greek solution” is conceivable here. As with the 2015 bailout in Greece, the life of bad loans could be significantly extended with creative bookkeeping.

However, a clear industry rotation “high-tech out, cyclical in” cannot be assumed, but rather an addition.

Because the business model of digitization is completely intact. Ultimately, the sector will not be smashed by the Biden administration. Because the IT giants grant the USA technological defense capability against China. No tiger willingly let its teeth and claws be pulled. Fluctuations due to accusations of dominant positions such as with Facebook or Google and therefore administrative measures must be taken into account. In the future, smaller tech stocks that occupy niches and are less politically negative will be in greater demand.

When America under Biden says goodbye to the fossil fuel era and dedicates itself consistently to climate and environmental protection, it will also become a powerful investment theme on the stock markets that will once again expand the market breadth. In fact, he is already planning to rejoin the Paris Climate Agreement and make extensive investments in clean energy. In general, stocks that meet the so-called ESG criteria (environmental, social, governance, i.e. environment, social and good corporate governance) will come even more into the focus of asset managers. As in the EU, they are also increasingly prescribed administratively in America.

Last but not least, stocks with high dividends remain attractive. The distributions next year will not be as high as they were two years ago. But they still clearly beat relevant interest investments.

Overall, the stock market will be more broadly oriented in the next year than in 2020. Cyclicals, high-tech, dividend stocks and green stocks make it broader and therefore more stable.

The salt in the stock market soup: takeovers, mergers and IPOs

If the positive scenarios prevail in 2021 and the stock markets continue to strengthen as a result, the willingness for larger takeovers and mergers will also increase significantly. Above all, takeovers with own shares will play a role. Many companies that are currently “hip” on the market, that have been swept up by the liquidity boom, or IT stocks that benefit from the home office culture, will use their extremely high market capitalization to destroy competition. In this way, you can also give substance to unsatisfactory business models.

The good mood will also lead to significantly more IPOs.

Stock savings plans: the remedy for “seasickness”

However, increased exchange rate fluctuations are to be expected in the meantime. The initially still weak economic recovery, also in terms of the implementation of Biden’s economic promise, harbors the potential for disappointment as well as possible bottlenecks in the vaccination process. In fact, January to April is arguably the riskiest equity period. The political and economic waves will then smooth out and the mood on the stock market will pick up.

Regular stock savings plans are a tried and tested investment strategy against price fluctuations. The so-called average cost effect has a particularly positive effect. Because if the prices fall in the meantime, the investors receive more shares for their constant savings contribution. When the share price rises again, the commercial motto “The profit lies in purchasing” has a positive effect: like a flood that lifts all ships, the entire stock assets then increase.

In general, all of the major price losses of the past were, without exception, not only made up for, but significantly overcompensated.

In the case of a generally positive share performance, the different strengths of the regions or countries are nevertheless evident. While European stocks are still lagging behind interest-rate investments, stocks from emerging Asian countries and America are clearly ahead.

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