• Moritz Eckes

No improvement in sight.

ifoAmpel Jun2019Dear Readers,

In June, the ifo business climate fell further to its lowest level since November 2014. In industry, which we regard as a sentiment indicator for the global economy and the stock markets, pessimism increased again after a brief improvement in sentiment in May. As in recent months, favourable assessments in the service sector and in construction are still supporting the overall climate. However, industry is already in recession today and is ensuring that the ifo traffic light remains on red (chart below).

The ifo traffic light indicates the monthly probability of an expansive economic development. Red traffic light values mean: The probability of expansion is less than one third. This points to a contraction of the economy in the future.

Whether the still ambitious earnings expectations of German industrial companies can be met in this situation is questionable. More likely are further downward profit revisions. These are then probably acknowledged with falling prices.

The verbal support by the central banks is currently still having a positive effect on the stock market. Both the US Federal Reserve and the ECB now expect market participants to lower interest rates in the coming months. However, a sustained positive effect on the share price development could only be expected if a solution to the trade dispute between the USA and China is indicated at the G-20 summit in Osaka at the weekend. Investors could then look through the current economic weakness and position themselves for an economic recovery in the second half of the year.


The private-wealth stock market indicator has been out of the stock market since the end of February 2018. This was triggered by the three-fold decline in ifo business expectations in the industry and the simultaneous very high valuation of the stock markets. Since then, the indicator has proposed a minimum weighting of equities of 0 - 30 percent of the individually planned equity component.

For the short-term positioning within this corridor we use the results of the capital market seismograph. The latter is currently proposing a weighting of 25 percent. We expect a new seismograph estimate tomorrow and will inform you immediately.


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.

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