Capital market seismograph stays cool in the corona panic.
While the stock markets were shaken by viral cramps, the capital market seismograph remains invested. "We recalculated every day, and the sum of the "good" probabilities green and yellow have moved only minimally from their highs. Accordingly, the probability of negative turbulence increased only minimally despite the panic on the stock markets," Oliver Schlick informs.
As you know, the capital market seismograph distinguishes between three phases: "green" (calm market = buy), "yellow" (turbulent market with positive expectation = invest, but with hedging) and "red" (turbulent market with negative expectation = do not invest) "From the seismograph's point of view there is therefore currently no reason to pull the ripcord. On the contrary, he continues to recommend an offensive equity weighting," Schlick notes.
That's interesting. Once before - in October 2019 - the seismograph had not been irritated by a massive correction and maintained its high weighting of equities in its portfolio. At the time, this was precisely the key to the very good performance in the final months of the year.
Will the seismograph be right again? In fact, it is almost impossible today to make a reliable statement about the effects of the corona virus on the global economy. This is also shown by an analysis of the countless bank reports on this topic.
We can probably assume that the corona case numbers will increase significantly in the coming weeks. And we can assume that many companies will report massive sales and earnings losses for the first quarter of 2020.
However, the key question cannot be answered: Will the slump in the first quarter turn into a deep global recession? In this case, the fair value analysis of the private wealth stock market barometer would indicate a potential setback of the DAX into the region between 7000 and 8500 points.
Or will it be possible to prevent the recession through expansive economic policy measures? Then the economic upswing would continue in the second half of 2020 and the turbulences of the last few days would remain only a short episode in the stock market diary 2020.
"The capital market can deal better with the threat of an economic downturn and the assessment of countermeasures than with an uncontrollable virus. Fiscal and monetary expansion measures have already been partially implemented in Asia, economic stimulus programs are being prepared in Germany and Europe, the US Federal Reserve has lowered its key interest rate, and the ECB is likely to take action as well. - All these countermeasures are positively received and the seismograph points in the same direction," notes Schlick
In the coming weeks, it is now important to monitor closely whether these measures are actually working. The decisive factor will be that there is a rapid stabilisation after the programmed crash of the early economic indicators.
As the seismograph continues to suggest an offensive weighting of the equity component, the private-wealth stock market indicator still suggests a current equity weighting in the upper range of the bandwidth between 30 and 70 percent of the individually planned equity component. However, investors must still be prepared for strong fluctuations. We remain on guard and will inform you immediately if the seismograph makes it necessary to adjust the equity ratio.
Note: Despite careful selection of the sources, no liability can be assumed for the accuracy of the content. The information provided in private wealth is for informational purposes only and does not constitute an invitation to buy or sell securities.