• Klaus Meitinger

Stabilisation of the economy supports stock market.

Dear Readers,

In August, the ifo business climate index rose again. Particularly in the manufacturing sector, which is important for the private-wealth stock market indicator, the mood has now improved considerably. Although many industrial companies still assess their economic situation as poor, the outlook for the coming months is much better (chart below). The ifo researchers explain that order books are filling up again.

This is encouraging. What is interesting for investors is that the recovery in the industrial sector should not only support the entire stock market. It could also create investment opportunities in second- and third-tier cyclical companies whose stock prices are still far below pre-corona levels.

After the stock market indicator suggested a month ago that the equity ratio should be further increased, the model has since then suggested a corridor between 60 and 90 percent of the equity ratio that is individually considered appropriate. for a more precise, short-term equity positioning within this range, we use the results of the capital market seismograph. This estimates the probability of three market conditions in the coming month. Green" means that a calm market with a positive trend is expected. Investors can invest with peace of mind. "Yellow" indicates a turbulent market with positive expectations - investing is okay, but hedging is indicated. And "red" indicates a turbulent market with negative expectations. The advice is then: Do not invest.

The seismograph has been signalling an improvement in the situation on the stock markets since the beginning of April. Since the end of April, the probability of a positively turbulent market (yellow) has clearly dominated events, and the seismograph has derived from this a clear overweighting of equities. "Nothing fundamental has changed in this respect at present. ", informs Oliver Schlick, who regularly calculates the seismograph data: "The probability of positive turbulence remains the dominant force. However, slowly - and this is positive - the probability of calm markets is now even increasing slightly.

Bottom line:

The recommended equity weighting of the private wealth stock market indicator was increased from 60 to 80 percent a month ago. As the Ifo indicator is positive and the seismograph suggests an overweight is advisable, an offensive stance is still advisable. The only obstacle to an even higher equity weighting is the high valuation of the markets. On balance, the equity ratio of the private wealth stock market indicator therefore remains at 80 percent of the capital earmarked for equity investments.


Klaus Meitinger

Note: Despite careful selection of the 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.