We are staying under cover.
Hopes for a turn for the better in ifo business expectations - the most important economic indicator for us - were dashed in June. After rising twice in April and May, expectations in the manufacturing sector deteriorated again. This means that the prerequisite for a positive trend reversal in the business cycle component of the private-wealth barometer - three consecutive increases - has not been met. The economic signal remains red. From this, we continue to derive a corridor for the recommended equity quota between 45 and 75 percent of the individually intended equity share.
Within this range, we are guided by the results of the capital market seismograph. Since the latter has long advised maximum defensiveness, the current equity ratio suggested by the private-wealth stock market indicator is only 45 percent. In plain language: more than half of the capital available for equities is parked in cash, waiting to be re-entered.
We are therefore watching the seismograph very closely in order to be able to give you a signal in good time.
As you know, the seismograph combines various economic variables - early economic indicators, interest rate developments or price fluctuations on the stock markets. From these, the probabilities for three market states in the next month are distilled. Green stands for the expectation of a calm, positive market. Yellow indicates the probability of 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 is time to get out.
In recent weeks, the rise probability of negative turbulence strengthened further. "It has now broken through the 80 per cent barrier to the upside and is absolutely dominant. The probabilities of the other two market states have plummeted towards insignificance," informs Oliver Schlick, Secaro, who regularly calculates the seismograph and develops allocation recommendations from it. "This is definitely not a level to take your head out of your seat. Patience continues to be the most important virtue for investors," says Schlick.
The bottom line:
The economic traffic light is on red. That is why the private wealth stock market indicator provides for a corridor for the recommended equity quota between 45 and 75 percent of the individually intended equity share. And since the capital market seismograph advises maximum defensiveness, the current concrete equity quota suggested by the private wealth stock market indicator is only 45 percent.
It is interesting to note that in view of the massive price losses of recent weeks, the DAX is now becoming increasingly attractive compared to its fair value. When is the time right to increase the equity ratio again from a valuation perspective alone? And at what levels would the DAX be really cheap? We will answer these questions in the coming week.
We are convinced that long-term investors will have exceptional buying opportunities in the second half of 2022. So that we can send you a "private-wealth-alert" if the assessment of the stock market indicator changes, please leave your mail address at www.private-wealth.de or register with your mail address for a free six-month trial subscription.
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 information purposes only and does not constitute an invitation to buy or sell securities.