News from the editorial

  • Silke Lauenstein

Idorsia - first milestone reached!

Idorsia slide 6

In the cover story of the latest issue of private wealth, we introduced you to the entrepreneurial couple Martine and Jean-Paul Clozel. They are founders and major shareholders of the Swiss biopharma company Idorsia. Jean-Paul directs the company's business as CEO, while Martine heads up research as Chief Scientific Officer.
The goal of the two is to build Idorsia into a leading biopharmaceutical company with a strong scientific core, "We want to discover things that others haven't discovered. We want to see how the projects we've started turn out. And we want to commercialize them ourselves." (link to article)

A first milestone on this path has now been reached.

On January 10, the U.S. Food and Drug Administration (FDA) granted approval for Idorsia's active ingredient daridorexant for insomnia.

Patients suffering from insomnia have three problems: they don't fall asleep, they don't sleep through the night, and they wake up too early. Those who don't get enough sleep don't perform well during the day. "Research shows that a certain substance prevents sleep," Martine Clozel told private wealth, "so the first thing was to find a molecule that suppressed its activity. It had to act fast enough to allow the patient to fall asleep quickly. The duration of action had to be long enough for the patient to sleep through a whole night. But above all, it had to be short enough to avoid hangover symptoms the next morning. This was an optimization task. We manipulated the molecular structure until it worked."

Apparently, QUVIVIQ - as the drug with the active ingredient is supposed to be called - actually enables people to fall asleep better and sleep through the night better. So overall sleep duration is increased.
Now the commercial launch in the USA is imminent. In the coming months, QUVIVIQ will also be reviewed by other health authorities (Canada, Europe, Switzerland). The documents have already been submitted.

The next step will be the approval of clazosentan, a drug for sudden spasmodic vasoconstriction. It is currently being reviewed by the Japanese authority. The problem often surfaces three to four days after successful surgery for a brain hemorrhage. "Patients can then die or parts of their brain lose function. So far, there is no drug against this. Clazosentan has been proven to prevent this spasm. That is unique," Martine Clozel explained.

Jean-Paul Clozel said, "This is the beginning of a transformative year for Idorsia. We want to launch two products in the two largest pharmaceutical markets at the same time. This will transform Idorsia into a full-fledged biopharmaceutical company and put sustainable profitability within reach."

On Wednesday, Feb. 12, 2021 at 16:30 Central European Time (CET), Jean-Pau Clozel will explain the preparations for the launch of the two products and outline Idorsia's future growth path at the J.P.Morgan Healthcare Conference. You can access the audio stream via the following link:
https://jpmorgan.metameetings.net/events/healthcare22/sessions/40109-idorsia-pharmaceuticals/webcast?gpu_only=true&kiosk=true link

Don't miss this opportunity to get to know this charismatic entrepreneur better

Yours sincerely
Klaus Meitinger 

Note: Despite careful selection of sources, no liability can be assumed for the accuracy of the content. The information provided in private wealth is for information purposes only and does not constitute an invitation to buy or sell securities.

  • Silke Lauenstein

private-wealth stock market indicator ahead of equity quota increase.

STOCK market indicator 

For more than 15 years, private wealth's stock market indicator has been giving equity investors valuable pointers on how to allocate the equity portion of their portfolio. The basic idea is to find out when the relationship between opportunities and risks in equity investments is positive. And when it is not. Anyone who used this as a guide would have been able to participate in the long upward phases on the markets and avoid the major loss phases, at least in part.

How does the stock market indicator position itself with a view to the new year?

The stock market indicator combines three factors - economic indicator, fair value calculation and the results of the capital market seismograph.

The long-term corridor for the equity exposure in the portfolio is defined by an economic indicator and the editors' internal fair value calculations for the DAX. The idea is that a high equity exposure is advisable when the stock market is favorably valued and/or when the economy and thus company profits are improving. Caution is advised if the economy and earnings are expected to deteriorate and/or the market is very highly valued.

Within the corridor defined in this way, the results of the capital market seismograph determine the exact positioning. Oliver Schlick, Managing Director of Secaro GmbH, has been translating its results into a stock allocation scheme since 2017. If the seismograph signals an equity overweight, the private-wealth stock market indicator positions itself in the upper range of the long-term targeted corridor and vice versa.

Let us now look at the individual factors at the turn of the year:

The editors answer the question of whether the stock market is cheap or expensive using a long-term trend model that incorporates a broad cross-section of macroeconomic data. This calculation of the fair value of the DAX is based on data material since 1954. A year ago, it was adjusted to the expectation that central banks would tolerate more growth and higher inflation rates without raising interest rates. This assumption has since been confirmed on a sustained basis. Despite high nominal growth (real growth plus inflation), the ECB stuck to its minus interest rate policy.

Assuming that this new regime continues - from our point of view, this continues to be very plausible - the German DAX share index is currently more than ten percent below its fair value. Even then, however, the MDAX is still significantly overvalued.

Overall, the valuation of the German stock market is close to fair value. In concrete terms, this means that the valuation indicator is currently neutral.

What does the economic component say?

The answer is provided by the business climate of the Munich-based ifo Institute. Every month, researchers ask around 9,000 companies about their business situation and their expectations for the next six months.

In the past, business expectations in export-oriented German industry in particular have proved to be very accurate economic indicators.

If expectations fell three times in succession following a previous increase, the probability of an economic downturn in Germany increased. And in the global economy, too, darker clouds would then usually gather.

If expectations then improved again three times in succession, this was usually a signal of a positive turning point in the economy and corporate results - and thus at the same time a buy signal on the stock market.

Business expectations in the industrial sector had delivered a sell signal in July 2021 and had continued to fall in the months thereafter. For this reason, the private-wealth stock market indicator had reduced the equity quota in the summer.

Now there are signs - almost hidden - of a positive trend reversal. It is true that the ifo business climate as a whole has continued to decline in recent months. However, the ifo Institute reported an initial slight increase in business expectations in industry, which are crucial for the indicator, as early as the end of November. In December, expectations improved further. If this trend is confirmed in January with a third increase, the conditions for a positive turnaround would be met. The economic component of the stock market indicator would then once again give the green light for stocks.

How is the capital market seismograph positioned:

The seismograph combines various economic variables and distills from them the probabilities for three market states in the next month, modeled on traffic lights. Green represents the expectation of a calm, positive market. Yellow denotes the probability of a turbulent-positive market. And red indicates the probability of a or turbulent-negative market. If it rises significantly, a stock market storm is looming and it is time to get out.

The seismograph already painted a very positive picture for the entire year 2021. Oliver Schlick regularly derived the recommendation "significant overweight" in equities from this. Currently, the probability of positive, calm markets (green) is well over two-thirds. The probability for negatively turbulent markets (red) is, as Schlick reports, less than three percent below the sensibility threshold. The remainder is accounted for by the probability of positively turbulent markets (yellow). Schlick's conclusion: "The picture remains unchanged. The seismograph continues to recommend a significant overweight at the turn of the year."

Conclusion:

For the first seven months through the end of July, the private-wealth stock market indicator was 110 percent invested in the equity market. Economic signals were positive, valuations were not stretched, and the seismograph advised an overweight position in equities.

Then, in the summer, the private-wealth stock market barometer had reduced the equity allocation to the corridor between 45 and 75 percent in view of the economic difficulties. However, the positive data from the seismograph ensured that the specific equity allocation was not dramatically reduced, but was fixed at 75 percent.

The performance of investors who followed the stock market indicator was thus just as high over the entire year 2021 as if they had been invested at 100 percent for the entire year. However, they spared their nerves during the significant price fluctuations in the last five months of this year.

If the economic component actually delivers a buy signal at the end of January 2022, the corridor would be raised significantly again - to 75 to 115 percent. If the seismograph's allocation recommendation is then still offensive, a significant increase in the equity weighting in the stock market indicator would be the result.

Interesting: In the past, a two-step increase in ifo business expectations in industry was very often also followed by the third step, which cemented the trend reversal. We explicitly point this out to you because January is often a strong stock market month and the indicator's buy signal could come a bit late in this case. For some investors, it may therefore be opportune to increase the share quota somewhat now - at the risk of having to reverse this step at the end of January if business expectations deteriorate again.

I wish you every success with your investments in the New Year. But above all, stay healthy,

Yours,

Klaus Meitinger

Note: Despite careful selection of sources, no liability can be accepted for the accuracy of the content. The information provided in private wealth is for information purposes only and does not constitute an invitation to buy or sell securities.

  • Klaus Meitinger

Omikron and the capital market seismograph.

Kapitalmarkt Seismograf 1Rarely have we been so eager to see the latest result of the capital market seismograph as today. Would the turmoil of the last few trading days and the concerns surrounding the Omicron variant change the positive view of the stock market barometer?

"To be sure, the likelihood of calm markets has been dampened. In return, the expectation of a positively volatile market rose. Negative turbulence is still not in sight. On balance, the seismograph's positive market expectations remain unchanged", informs Oliver Schlick, Managing Director of Secaro GmbH, who regularly calculates the model and links it to investment recommendations.

What is interesting here is that the emergence of the mutation could reduce the fear of interest rate hikes. "Fed Chairman Powell also recently emphasized the risks to the economy and labor market. Because the Fed may therefore not be in a hurry to raise interest rates for the foreseeable future, central banks should continue to act in a rather supportive manner. This could compensate for the negative effects of the new virus variant in the eyes of market participants," explains Schlick.

Our conclusion: The equity ratio suggested by the private-wealth stock market indicator was lowered in July to a corridor between 45 and 75 percent due to the continuing decline in the economic component (ifo business expectations). Within this corridor, the capital market seismograph determines the exact ratio. As it remains positive, the proposed equity weighting of the private-wealth stock market indicator remains at 75 percent of the capital allocated to equities.

Stay well,

Yours

Klaus Meitinger

Note: Despite careful selection of sources, no liability can be assumed for the accuracy of the content. The information provided in private wealth is for informational purposes and is not an invitation to buy or sell securities.

  • Klaus Meitinger

Light at the end of the tunnel.

Licht am Ende des TunnelsThe publication of the ifo Business Climate for the month of November has led to almost unison negative comments. "Worries about a cooling of the global economy", "Corona blues". Indeed, the ifo business cycle clock (chart below left) is ticking swiftly through the cooling quadrant and is now approaching crisis territory alarmingly. The ifo economic traffic light (chart below right) also remains "deep red". In plain language: the ifo Institute now rates the probability of a cyclical phase of expansion at close to zero percent.

2111 PW NadR Charts

That does not look good. But there are also two glimmers of hope. First, export expectations have risen slightly again. Above all, however, business expectations in industry have risen slightly again for the first time after a seven-month decline. The automobile industry in particular is apparently breathing a sigh of relief and expects growth in its foreign business.

This is important information for the private-wealth stock market indicator. After all, industry expectations are one of three indicators that determine the stock ratio of the model. It combines the analysis of the long-term fair value of the DAX with an economic component derived via the ifo climate and the tactical positioning of the capital market seismograph.

The massive decline in the economic component meant that the equity weighting of the model had to be significantly reduced in July. Another improvement in December would be seen as a strong indication that the German economy is putting the fourth-quarter 2021 dip behind it. And it would be a signal to increase the equity allocation again. That's because the valuation component of the model remains neutral and the third factor - the capital market seismograph - has been consistently very positive for 18 months.

"Despite the worsening of the pandemic situation in Europe, the probabilities of the seismograph have actually hardly changed," informs Oliver Schlick, Managing Director of Secaro GmbH, who regularly calculates the seismograph and links it to investment recommendations. The probability for a calm positive market development (green) and a positive turbulent market (yellow) is cumulatively above 99 percent. The probability for a turbulent negative market (red) does not matter. "This is not an environment where a major correction would be expected," Schlick says.

Our conclusion: the equity weighting suggested by the private-wealth stock market indicator had been lowered in July to 75 percent of the capital allocated to equities. The model still maintains this weighting at present. One reason for this is that when the current ifo data were collected, the Corona situation was nowhere near as dramatic as it is today. It could therefore well be that expectations in the industrial sector turn downward again in December. We are therefore waiting to see whether a new trend actually establishes itself. Only then would the model become more offensive again.

Stay healthy,

Yours

Klaus Meitinger

Note: Despite careful selection of sources, no liability can be accepted for the accuracy of the content. The information provided in private wealth is for informational purposes and is not an invitation to buy or sell securities.

  • Klaus Meitinger

The climate is getting frosty.

Charts IfoOur indicators suggest that there will be greater fluctuations on the stock markets in the coming weeks. This is why the private-wealth stock market indicator already reduced its suggested equity allocation three months ago.

The current data from German industry support this decision.

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