In recent weeks, the thunderclouds measured by capital market seismographs have gradually dissipated over the capital markets. "The sum of the "good" probabilities is now over 70 percent again." In combination with the sudden increase in the probability of calm markets, this ensures that the seismograph now considers a short-term significant increase in the share quota to be appropriate," explains Oliver Schlick, who regularly calculates the capital market seismograph with his team.
As you know, the capital market seismograph distinguishes between three phases: "green" (quiet market = buy), "yellow" (turbulent market with positive expectation = invest, but with hedge) and "red" (turbulent market with negative expectation = do not invest).
The ifo-Institut writes that the worries among German corporate leaders are getting deeper and deeper. In August, the ifo business climate finally fell significantly once again and has now reached its lowest level since November 2012. In industry, which we regard as a sentiment indicator for the global economy and the stock markets, a similar pessimism was last observed in the crisis year 2009. It is particularly problematic that the massive decline apparently affects all sectors. According to the ifo Institute, none of Germany's key industries showed any signs of improvement.
We have just received the new estimate of the team around Oliver Schlick, who regularly calculates the capital market seismograph. Since our last report to you, the likelihood of negative turbulence has quickly built up, although the absolute level remains within bounds. The speed at which thick black clouds form in order to remain in the seismograph's image is more of a concern here. "This is problematic and must be taken seriously," says Oliver Schlick and continues: "The seismograph's new positioning is defensive weighting."
The mood on the German executive floors is becoming uncomfortable, writes the ifo Institute. In fact, the ifo business climate continued to decline in July. In industry, which we regard as a sentiment indicator for the global economy and the stock markets, the business climate indicator is even in free fall. Especially the export suffers (graphic 1).
The seismograph points to a turbulent but positive market development.
Dear Readers,
We have just received the new estimate of the team around Oliver Schlick, who regularly calculates the capital market seismograph. As you know, it distinguishes between three phases: "green" (quiet market = buy), "yellow" (turbulent market with positive expectation = invest, but with hedge) and "red" (turbulent market with negative expectation = do not invest).
Currently, the probability of a calm, positive stock market ("green, buy or hold") is only 27 percent. However, the probability of a turbulent, volatile market with a positive trend ("yellow") has risen to 34 percent. The probability of negative turbulence reaches 39 percent. "Of particular interest is the increase in the probability of positive-turbulent markets. In particular, the significant decline in money market rates due to the ECB's and the FED's tendency to lower interest rates made a major contribution to this. Overall, the probability of "favorable" markets thus rises by more than 60 percent," explains Oliver Schlick and concludes: "Despite the continuing weak fundamental economic data, a comparatively high equity ratio is derived from the seismograph's values. But expect strong fluctuations."
Conclusion:
The private-wealth stock market indicator has been out of the stock market since the end of February 2018. This was triggered by the three-fold decline in ifo business expectations in the industry and the simultaneous very high valuation of the stock markets. Since then, the indicator has proposed a minimum weighting of equities of 0 - 30 percent of the individually planned equity component.
For the short-term positioning within this corridor we use the results of the capital market seismograph. Since the probability for a bear market is below 40 percent, the proposed equity ratio remains at 25 percent.
yours
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.
Written by Moritz Eckes on .
No improvement in sight.
Dear Readers,
In June, the ifo business climate fell further to its lowest level since November 2014. In industry, which we regard as a sentiment indicator for the global economy and the stock markets, pessimism increased again after a brief improvement in sentiment in May. As in recent months, favourable assessments in the service sector and in construction are still supporting the overall climate. However, industry is already in recession today and is ensuring that the ifo traffic light remains on red (chart below).
The ifo traffic light indicates the monthly probability of an expansive economic development. Red traffic light values mean: The probability of expansion is less than one third. This points to a contraction of the economy in the future.
The ifo business climate rose in March for the first time in six months. This, at first glance, good news, however, is put into perspective when looking at the individual areas. The service sector, trade and construction were responsible for the increase. In industry, which is regarded as a sentiment indicator for the global economy and the stock markets, the decline continued steeply (Chart 1). The expectations of entrepreneurs in the manufacturing sector have now reached their lowest level since November 2012.
The ifo business climate continued to fall in February. The worries in the German executive floors are increasing, according to the Munich economic researchers. The results of the ifo survey and other indicators would point to economic growth of 0.2 percent in the first quarter of 2019. After a minus of 0.2 percent in the third quarter and a black zero in the fourth quarter of 2018, this means that the German economy is stagnating.
It can get even worse in the future. As you know, we are closely monitoring the expectations of the 9000 entrepreneurs surveyed by the ifo Institute. These point further down. Pessimism is increasing across the board. This is particularly pronounced in the industry, which is so important for Germany. According to the ifo economic clock, the German economy has thus established itself in the downturn quadrant. The ifo traffic light is still on "red" (attached graphs)
The ifo-Institut writes that the worries among German corporate leaders are getting deeper and deeper. In August, the ifo business climate finally fell significantly once again and has now reached its lowest level since November 2012. In industry, which we regard as a sentiment indicator for the global economy and the stock markets, a similar pessimism was last observed in the crisis year 2009. It is particularly problematic that the massive decline apparently affects all sectors. According to the ifo Institute, none of Germany's key industries showed any signs of improvement.
The mood on the German executive floors is becoming uncomfortable, writes the ifo Institute. In fact, the ifo business climate continued to decline in July. In industry, which we regard as a sentiment indicator for the global economy and the stock markets, the business climate indicator is even in free fall. Especially the export suffers (graphic 1).
Dear Readers,
The ifo business climate rose in March for the first time in six months. This, at first glance, good news, however, is put into perspective when looking at the individual areas. The service sector, trade and construction were responsible for the increase. In industry, which is regarded as a sentiment indicator for the global economy and the stock markets, the decline continued steeply (Chart 1). The expectations of entrepreneurs in the manufacturing sector have now reached their lowest level since November 2012.
Dear Readers,