The capital market seismograph had issued a thunderstorm warning nine days ago. The probability of negative turbulence on the stock markets had increased significantly. For precautionary reasons, the equity quota was reduced accordingly. This step is now - in part - being revised again.

As you know, the seismograph combines various 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 - invest, 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.

"After the drastic increase in the red probability in the first ten days of this month, the probability situation has currently eased again due to declining interest rates in the medium maturity segment and a slight improvement in the global economic climate - the red probability has fallen significantly, the yellow probability has risen accordingly," informs Oliver Schlick, who translates the signals of the seismograph into allocation proposals for Secaro GmbH and continues: "To draw a picture: A strong wind drove away the dark clouds. On balance, the "positive" probabilities yellow and green have now clearly gained the upper hand again".

Schlick's conclusion: "The period of turbulent market developments should indeed continue. Given the absolute dominance of the probability of positive turbulence, re-entry should nevertheless be initiated cautiously."

The bottom line:

The economic development in Germany and the market valuation of the DAX define the strategic corridor for the equity allocation of the private-wealth stock market indicator. Currently, this lies between 55 and 85 percent of the individually planned equity share.
Within this range, the capital market seismograph determines the exact positioning of the private-wealth stock market indicator. After the seismograph recommended being very defensive nine days ago, the stock ratio specifically suggested by the stock market indicator was reduced from 85 percent to 60 percent. Even then, however, Oliver Schlick had announced that the seismograph could gradually abandon its defensive stance if the increase in the red probability did not continue.
With the current, positive change in the probability landscape, this condition has come about faster than expected. Therefore, the stock ratio specifically suggested by the stock market indicator will be consistently increased from 60 percent to 70 percent of the individually envisaged stock ratio.

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.
For a more detailed explanation of the private wealth stock market indicator, please read "News from the editorial office - strategic buy signal for German shares" of 25 January 2023.

Photo: Todd Quackenbush on Unsplash