• Klaus Meitinger

Seismograph remains relaxed.

Kapitalmarkt Seismograf 2Dear Readers,

Disappointments over slow vaccine deliveries and, above all, fears of hedge fund bankruptcies had put pressure on the stock markets at the end of last week. As announced, Oliver Schlick, who as managing director of Secaro GmbH distils investment recommendations from the calculations of the capital market seismograph, analysed how the individual variables of the seismograph reacted to this. The question was: Should the turbulence of the last few days be taken seriously or not?

"I can give the all-clear," says Schlick, "the somewhat higher volatility on the market has merely led to the probability of calm markets ("green") declining again somewhat in favor of the probability of positively turbulent markets ("yellow"). The two favourable characteristics for investors together are still well above 90 percent, which is why the model's recommendation continues to be: Significant overweighting. The newsflow of the past few days, especially as it relates to stories about the 'battle between private investors and hedge funds,' need not be taken seriously."

As they know, the Seismograph regularly estimates the likelihood of three market states in the coming month. Where "green" means a calm market with a positive trend is expected. Investors can invest with peace of mind. "Yellow" indicates a turbulent market with a positive expectation - investing is fine, but be prepared for volatile times. And "Red" signals a turbulent market with negative expectation. The advice then is not to invest.

Conclusion:

Since the Ifo economic indicator is positive, the private-wealth stock market indicator sets the equity ratio at 80 percent on the premise that the historical correlation between earnings growth and interest rates will hold in the future. This is because in this case, equity markets would be significantly overvalued today relative to their long-term fair value and this would not allow for more aggressive exposure.

However, we have also found very good arguments that the "zero interest rate era" will continue for a very long time and that corporate earnings will nevertheless rise in line with past trends. Because in this scenario the fair value of equities increases significantly, the private-wealth stock market indicator would then suggest an expansion of the equity allocation up to 110 percent. (Please read our explanation of the evolution of the private-wealth stock market indicator from last week).

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.