• Klaus Meitinger

Stay cool and in cash.

(Reading time: 2 - 4 minutes)


Once again, the Seismograph underlined how valuable it is for investors. Since 3 May, the Secaro Gmbh model has been advising maximum caution. At the time, Secaro managing director Oliver Schlick informed us: "All input factors just caused a significant increase in the probability of negative turbulence. The dynamics are so strong that the rules of the model call for a clear change in the equity quota. The recommendation of the approach is now to be strongly defensive and maximally cautious."  

With this news, the capital market seismograph ensured that the private-wealth stock market indicator, which had already been positioned defensively since 29 February, reduced the equity allocation even further. Since then, it has amounted to only 45 percent of the equity portion individually earmarked for the portfolio. 55 percent of the capital reserved for shares is parked in cash, waiting for more favourable prices.

The fact that the seismograph's signals have continuously signaled maximum caution in recent weeks has not only saved us a lot of stress. It has also prevented us from increasing the equity quota in the meantime, which in the current market environment would most likely have led to significant losses in the portfolio.

But the further prices fall, the more attractive equities become for long-term investors. 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 threatens and it is time to say goodbye.

At the moment, however, Secaro is not yet giving the all-clear. For some time now, the red probability has been holding above 60 per cent. "This is definitely not a level to take your head out of your seat. After all, the aim of the seismograph is to prevent investors from losing house and home in a prolonged bear market. This danger still exists. Investors should therefore remain patient," advises Schlick. 

The bottom line:

Since the economic traffic light is still on red, the private wealth stock market indicator has provided a corridor for the recommended equity quota between 45 and 75 percent of the individually intended equity share since 28 February. Within this range, we are guided by the results of the capital market seismograph. Since the latter advises maximum defensiveness, the concrete equity quota suggested by the private-wealth stock market indicator is currently only 45 percent.

This does not have to remain so for much longer. On 24 June, the ifo business climate index could give an economic buy signal. And the third component of the private-wealth stock market indicator - current share prices compared to the fair value of the DAX - also becomes more attractive with every day that prices continue to fall. So that we can send you a "private-wealth-alert" immediately 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.

Yours sincerely,

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 information purposes only and does not constitute an invitation to buy or sell securities.

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