• Klaus Meitinger

The seismograph indicates further relaxation.

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Kapitalmarkt Seismograf 2The seismograph is a kind of weather forecast for the stock market. Using a complex mathematical model that includes both economic variables and direct market indicators, the model estimates the probability of three market conditions in the coming month. Green" means that a calm market with a positive trend is expected. "Yellow" indicates a turbulent market with positive expectations - investing is okay, but hedging is indicated. And "red" indicates a turbulent market with negative expectation. The advice is then: Do not invest.

The editorial team uses these results to determine the short-term equity positioning within the range suggested by the private-wealth stock market indicator.

At the beginning of the second week of March, the capital market seismograph suggested that the equity ratio should be reduced significantly. In mid-April, it then loosened the very defensive stance in order to slightly increase the positioning on the stock market again. "In the meantime, the probability of positive turbulence (yellow) has risen significantly again. Of course, positive turbulence is also turbulent - but on balance, this result allows for a further increase in the equity ratio," explains Oliver Schlick from the analysis company Secaro.

What is particularly interesting at present is that the weak economic data hardly play any role. "All eyes are on the central banks. Their monetary expansion combined with the hope of success in the development of Gilead's drug Remdesivir has led to lower volatility and falling interest rates - and thus on balance to a more favourable distribution of probabilities for the seismograph," Schlick analyses.

For the private-wealth stock market indicator, this means that the recommended stock weighting, derived from the ifo indicator and a fair value calculation, remains within a corridor of 30 to 70 percent. Specifically, however, 50 instead of 40 percent of the capital earmarked for equity investments should now be invested. The other half remains in cash as liquidity.

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.

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