The capital market seismograph delivered a little Easter surprise. In keeping with the festive season, the storm clouds seem to be gradually receding. "The long-lasting dominance of negative turbulence probability has ended. Positive and negative turbulence probability (yellow and red) are now roughly equal. In such a scenario, it is appropriate to overweight stocks in the portfolio," informs Oliver Schlick, who translates the signals of the seismograph into allocation proposals for Secaro GmbH.

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. If green dominates, investors should invest in shares. Yellow indicates the probability of a turbulent positive market - investing, but with a sense of proportion. And red indicates the probability of a turbulent-negative market. Then abstinence from equity investments is the order of the day

There are reasons why the seismograph is now gradually abandoning its basic defensive stance. "Two important variables in the calculation of the seismograph have changed," explains Schlick: "Firstly, the OECD's business cycle indicator has left its lowest level and is now less negative. This proven indicator for the global economic climate thus signals a general calming of the economic world situation. Second, the interest rate picture has eased. Market data suggest that the camp of those expecting an imminent end to the Fed's restrictive monetary policy is now growing larger. The weak development of US job offers, for example, is seen as the first indication that the interest rate hikes are now (finally) having an effect on the labour market. If the pressure built up in the inflationary cauldron via wage developments now slowly escapes, the peak in US key interest rates could indeed almost have been reached".

At the moment, the narrative on the stock markets seems to be changing. The expectation that "Operation Inflation Fight" can actually succeed without causing a recession is gaining more and more adherents. "This does not mean that the turbulent times in the stock markets are over. But the big danger seems to have been averted. The gloomy variant - turbulence with a negative undertone - is now less likely," Schlick concludes.

The bottom line:

The economic traffic light of the private-wealth stock market indicator is green and the valuation of the German stock market is still below its fair value. For this reason, the stock market indicator currently defines a strategic corridor for equity investments between 65 and 95 percent of the individually planned equity share.
Within this range, we are guided by the results of the capital market seismograph. Because the seismograph now suggests an overweighting of equities, the equity quota suggested by the private-wealth stock market indicator moves towards the upper edge of the strategic corridor. Specifically, the ratio increases from the previous 80 to 88 percent of the individually envisaged share of equities.
This reference to the individually intended equity share is important to us. Models like the private-wealth stock market indicator can only ever be based on economic data. How high the individual share quota should be in times of war must be decided by each investor on the basis of his or her own risk appetite and risk-bearing capacity.

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 informational purposes and is not an invitation to buy or sell securities.