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Stock markets: Despite the records, there is restraint – Munich Stock Exchange column

The year ended with records: The German stock exchanges gained in the last, shortened trading week and posted some new record highs. On Monday and Tuesday, the agreement on a trade agreement between the EU and Great Britain and the adoption of an economic stimulus package in the US drove prices. Additional support came from the expectations of the vaccinations against the corona virus that had started or started in many countries. After the pandemic had dominated the markets for most of the year, hopes of overcoming it held the upper hand at the end of the year. Although a number of investors realized profits in the last trading days of the year, a positive weekly balance did not prevent this.

The German share index (Dax) crossed the 13,800 point mark for the first time on Monday, the 3,900 mark fell on Tuesday, and the new high is now a good 13,903 points. On Wednesday, the Dax closed at 13,718.78 points, an increase of 1.0 percent compared to its final reading before Christmas Eve. Over the course of the year, this meant an increase of around 3.5 percent in the Corona year 2020 – after a temporary slump of around 40 percent. The biggest index winners of the year, with a price increase of almost 80 percent, were Delivery Hero, which was only promoted to the Dax in August – they are replacing Wirecard here after its previous accounting scandal. At the end of the year’s list of losers, Bayer’s titles were down by over 30 percent. The MDax also marked a new record high at over 31,000 points last week of trading, and it ended the year at 30,796.26 points – an increase of 1.3 percent over the previous week and almost 9 percent over the beginning of the year. The TecDax rose 0.9 percent over the week and almost 7 percent over the year to 3,212.77 points. The m: access All-Share, which also set a new record high in the past week of trading, improved by 2.3 percent over the previous week to 2,870.94 meters. Over the year it gained over 9 percent.

Last week, the German bond markets again showed no clear trend. Sales were kept within narrow limits, and trade between the years was calm. The temporarily very good mood on the stock markets put some pressure on the prices of the federal securities, which are considered safe. The yield on the trend-setting ten-year federal bond fell compared to the previous week from -0.55 to -0.58 percent. In contrast, the current yield rose from -0.60 to -0.56 percent. At the beginning of the year, the ten-year federal bond had yielded -0.29 percent, the current yield was -0.30 percent.

The US stock exchanges surpassed old record highs and posted profits in the past trading week. Compared to Thursday the previous week, the Dow Jones Index gained 1.3 percent to 30,606.48 points, and in 2020 as a whole it rose by around 7 percent. The broader S&P 500 index ended 2020 at 3,756.07 points, which meant a gain of 1.4 percent from the previous week and over 16 percent over the year. The technology-heavy Nasdaq-100 improved compared to the previous week by 1.4 percent to 12,888.28 points. Year-on-year, this was an increase of over 46 percent.

outlook

Despite the records at the end of 2020, most observers are cautious when it comes to the first week of trading of the new year on the German stock exchanges. Some things have been anticipated by the recent price increases, the hopes for the corona vaccinations and the relief from the trade agreement with Great Britain could largely be priced in, it is said. In addition, the number of corona infections is still high and an extension of the lockdown in Germany seems likely. The pandemic should also play an important role for the full year 2021, as it will be some time before the return to largely normalcy. This should also be reflected in the economic data.

How much the virus and its consequences have recently impacted the economy should be evident from the economic figures in the coming days. In addition to the purchasing manager indices from both sides of the Atlantic, the focus here is primarily on the US labor market figures. However, investors do not necessarily have to react negatively to a weaker default, as this increases the chances of additional help through monetary policy or government measures. In this country, market participants should pay attention to industrial production and work orders, among other things. In addition, inflation figures are expected. According to some analysts, these could gain in importance in the further course of the year, since they believe that the persistently very loose monetary policy will be reflected in rising inflation rates when the economy recovers.

In any case, many market participants are expecting an unchanged high level of volatility for the coming days as well as for the following weeks. In the current week this could be reinforced by the fact that many investors are still on vacation and lower trading volumes favor price fluctuations.

Selected important dates of the week

Monday. 04.01 .: Purchasing manager indices for the manufacturing industry in Germany and the Eurozone; Markit PMI Manufacturing Index (USA); Caixin Purchasing Managers’ Index for the manufacturing sector in China
Tuesday, January 5th: Retail sales in Germany; Unemployment figures for Germany; ISM index for the US manufacturing sector
Wednesday, January 6th (Holy Three Kings holiday, stock exchange trading takes place: consumer prices in Germany; service indices for Germany and the euro zone; ADP labor market report (USA); minutes of the previous meeting of the US Federal Reserve; work orders in the USA; Markit PMI service index (USA);
Thursday, January 7th: Factory orders in Germany; Retail sales in the euro area; Consumer prices in the euro area; Business climate in the eurozone; Consumer confidence in the eurozone; ISM Service Index (USA); USA trade balance
Friday, January 8th: industrial production in Germany; Germany’s trade balance; Unemployment figures for the euro zone; US Labor Market Report; US consumer credit

Author: Dr. Robert Ertl, board member of Bayerische Börse AG

Livestream on December 14th, 2020 from 6 p.m .:

With Hans-Werner Sinn, former President of the Ifo Institute.

With Hans-Werner Sinn, former President of the Ifo Institute: Corona and the miraculous increase in money in Europe
– Here is the stream! –

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