Markets

Dax owes record hunting to Joe Biden

D.he German stock market continued its record run on Friday. At the start of trading, the Dax effortlessly jumped the 14,100 point mark after having overcome the 14,000 point hurdle the day before. The German benchmark index recently gained 0.8 percent to 14,083 points in early trading. At the top he reached 14,132 points on Friday morning. With an increase of almost 3 percent for the entire week, the Dax is heading for a strong start to the year.

As in the United States and Asia, hope for even more extensive economic aid in the United States and the global corona vaccination campaigns are mainly based on. Positive data from domestic industry also contributed to the positive mood. After strong incoming orders in November, the data on industrial production turned out to be better than analysts expected. “Investors are in a frenzy,” said portfolio manager Thomas Altmann from investment advisor QC Partners. If the expected growth surge does not come soon, however, a setback must be expected.

“New aid packages promptly”

The main driver of the current rally continues to be speculation about additional government stimulus aid in the United States after the Democratic victory in the Senate elections, which gave President-elect Joe Biden a majority in both chambers of Congress. This enables him to implement his economic policy program more quickly because he does not have to compromise with the Republicans. The storming of the Capitol by supporters of the outgoing President Donald Trump had almost no impact on the stock markets.

“The stock exchanges around the world remain in a record mood. Wall Street has no holding back after the Democrats have marched through, ”stated Axi’s market analyst Milan Cutkovic. Investors quickly expected further measures for the ailing American economy, as the economic recovery was losing momentum due to rising corona numbers and tighter restrictions. “It is all the more important that new aid packages follow promptly,” said Cutkovic.

“The weak dollar helped propel American stocks higher,” said Geir Lode, chief equity strategist at asset manager Federated Hermes. Banks, energy and mining companies have led the way so far. With Wednesday’s election results in Georgia pointing to a Democratic Senate, technology stocks suffered a setback as investors worried about Biden’s potential plans for tighter antitrust regulations and higher taxes in the sector, Lode said.

In contrast, small and midsize stocks, which included more economically sensitive sectors like financials and manufacturing, rose in hopes that Democrats could spark a new wave of economic and infrastructure spending, which would spur economic growth and inflation, the adds Strategist added.

But the higher the stock markets rise, the louder the warning voices become. Fears of a new bubble in the stock markets are growing. Market strategist Albert Edwards of the French bank Société Générale, for example, emphasized that the rally was based heavily on the hope of many investors that the US Federal Reserve would intervene in case of doubt to prevent a crash. The cheap money flood of the central banks has been driving the stock exchanges for a long time. This can be problematic if inflation suddenly increases. Rising interest rates are likely to put pressure on the stock markets quickly.

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