At the end of the year, the mood in German industry deteriorated again slightly according to the ifo business climate. Business expectations became more pessimistic. And on the ifo economic clock, the rise towards recovery has stopped for the time being (chart).

Only a month ago, the ifo economic indicator had indicated a turnaround for the better. Does this now need to be revised?

It is important for you to know that only three consecutive declines in business expectations would erase the positive economic signal. Short-term fluctuations in this indicator are not unusual when the economy is working its way out of a trough. The positioning of the private wealth stock market indicator will therefore not change for the time being.

The bottom line:

All three components of the private-wealth stock market indicator continue to look promising. The economic indicator is still "green". The current market valuation of the DAX relative to its long-term calculated value is still fair despite the price increase in recent months. The strategic corridor for the equity allocation therefore remains at 70 to 110 percent of the individually planned equity allocation.

Within this range, the results of the capital market seismograph determine the exact positioning of the stock market indicator. Here, too, little has changed recently. The probabilities of a calm, positive market (green) and a turbulent, positive market (yellow) are roughly equal. The probability of a turbulent negative market is close to zero. In view of this, the capital market seismograph continues to suggest a full investment ratio.

The stock market indicator is therefore entering the new year with an overweight in equities. Specifically, the equity allocation remains at 110% of the individually planned equity allocation. This means that anyone who considers an equity allocation of 50 percent to be optimal based on their individual preferences in the strategic asset allocation should now be 55 percent invested in equities (110 percent of 50 percent results in an equity allocation of 55 percent). It should be particularly worthwhile to consider small and medium-sized stocks.

I wish you all a Merry Christmas and a successful investment year 2024,
Yours
Klaus Meitinger

Note: Despite careful selection of sources, no liability can be accepted for the accuracy of the content. The information provided on the private wealth website is for information purposes only and does not constitute an invitation to buy or sell securities.