• Klaus Meitinger

Capital market seismograph is out.

(Reading time: 1 - 2 minutes)

RED Seismograf

As promised, we will keep you up to date on developments in the capital market seismograph. As you know, the seismograph combines various economic variables, such as leading economic indicators, interest rate developments or price fluctuations on the stock markets. From these, it distills the probabilities for three market states over the next month. Green represents the expectation of a calm, positive market. Yellow denotes the probability for a turbulent positive market. And red indicates the probability of a turbulent-negative market. If this rises significantly, a massive stock market storm is looming and it's time to get out.

"The seismograph focuses not only on the absolute values of the probabilities, but also on the changes - especially those in the probability of negative turbulence. It's like a beautiful summer day with only black clouds on the horizon," explains Oliver Schlick, managing director of Secaro GmbH, who regularly calculates the model and links it to investment recommendations. "If this band of clouds is rapidly approaching, you will have to come up with something to avoid getting wet. This is despite the fact that summer temperatures are still prevailing and the skies could continue to be mostly bright blue. So it's not just the level of probability of a negative development, but also the dynamics with which that probability changes that could tip the balance in favor of positioning."

This is precisely the case that has now occurred. A rapid rise in the red probability demands clear action, according to the model's rules. "The recommendation of the approach is now to significantly reduce the equity exposure," Schlick informs.

The bottom line:

In view of the extremely high probability of negative influences on the global economy, we believe it is advisable to position oneself more defensively. We defined the corridor of an equity allocation of between 45 and 75 percent as a good point of reference for this in our message yesterday. Since the capital market seismograph now considers a maximum underweighting to be indicated, the current equity quota suggested by the private-wealth stock market indicator is 45 percent of the individually envisaged equity allocation.



Klaus Meitinger

Note: Despite careful selection of sources, no liability can be assumed 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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