A month ago, there was a little hope in German industry. Business expectations had improved again for the first time after falling four times. Another increase in November would have opened up the possibility of an economic turnaround, which the ifo Institute itself defines as three consecutive increases in business expectations.

Would have, would have.
In the current month of November, writes the Munich-based ifo Institute, business expectations have fallen again. After minus 15.8 points in October, they now stand at minus 18.8 points. The spark of hope has thus been extinguished.
We had already feared this a month ago. If Donald Trump were to win the US election, we wrote at the time, there was a high probability of a further deterioration in expectations.
This scenario has now materialised. The economic component of the private wealth stock market indicator therefore remains ‘red’.

The conclusion for investors:

The economy, especially the business expectations of German industry, and the market valuation of the DAX define the strategic corridor for the equity allocation of the private wealth stock market indicator.
As the economic component is set to ‘red’ and the German stock market is trading slightly above its ‘fair value’, this range lies between 45 and 75 per cent of the individually planned equity allocation. Should the DAX climb above 20,000 points in the coming weeks, the analysis of the fair value would suggest a further reduction in the strategic range.

Within this corridor, the capital market seismograph - the third component in the private wealth stock market indicator alongside the economy and valuation - defines the exact positioning. The probability landscape of the seismograph has been very positive for a long time. This has not changed recently. This is why the equity allocation in the private wealth stock market indicator remains at the upper end of the strategic corridor at 75 per cent.

An example: For investors who consider an equity allocation of 50 per cent to be optimal in the strategic allocation of their assets, the model would suggest investing only 37.5 per cent in equities at present (75 per cent of 50 per cent results in an equity allocation of 37.5 per cent). The cash portion, 12.5 per cent, is available to buy more cheaply in the event of any setbacks.

Yours sincerely,

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 stock market indicator is for information purposes only and does not constitute an invitation to buy or sell securities.