Germany continues to boom.
The current business situation in German companies is currently assessed as more positive than it has been since mid-2011. In the construction industry, the assessment of the situation even rose to its highest level since reunification. The results of the surveys on the ifo business climate index in April now point to a significant acceleration in real economic growth in areas above the two percent mark. This is also underlined by the ifo traffic light. The signal there is clearly "green".
Germany is still in a boom scenario (see chart). This is also reflected on the stock markets. The DAX has now reached a new high and is already being paid at around 135 percent of its fair value. The overvaluation in the MDAX segment is even more massive.
This pattern of overvaluing equities in the economic boom is typical. After all, investors in these phases continue the high increases in corporate profits into the future. But at some point this boom will be followed by another downturn.
Identifying the turning point in the economy at an early stage is the most important task for investors. The private wealth exchange model therefore closely monitors the ifo Institute's results on business expectations in industry. Three consecutive declines in expectations would indicate a turnaround. The most important aspect of the ifo economic survey in April is therefore the slight decline in business expectations. In addition, export expectations declined slightly in the month of April. The optimism of the last few months is waning somewhat. This is not yet a matter of concern. Only if expectations continue to fall in May and June would a sell signal be generated in the stock market model.
Our conclusion: As long as the economy does not deteriorate further or the stock market does not rise by another ten to 20 percent, the positive basic orientation will remain. In view of the high valuation of the market, however, the model continues to "only" suggest an equity quota of 60 percent of the equity share that the respective investor considers to be appropriate in the long term.
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.