Full steam ahead.
The Ifo business cycle indicator has made up for last month's decline. It is noteworthy that companies are now assessing their current situation better than they have been for more than five years. There is no doubt about it: Germany is in the midst of a veritable economic boom. The fact that expectations for the coming six months have improved even further in this situation is astonishing. At some point in the coming months there will be a turnaround in expectations. Because if the economy cannot (even) get better, it simply gets worse. This needs to be monitored closely, as it could trigger a sell signal for equities.
At present, however, the German economy is still stable in the boom segment of the ifo economic clock. And the ifo traffic light is also moving back to "green" after a brief decline towards "yellow" (see chart).
The assessment of the private wealth exchange model therefore remains unchanged on balance. The economic component has been positive since May 2016. At that time - when the DAX was quoted at just over 10,000 points - the share quota in the model was increased from 30 to 60 percent. And remained at this level despite the irritations caused by Brexit and Trump.
In this environment, the valuation of German equities continued to rise. In the meantime, the DAX has already reached 130 percent of its fair value. At such a level, of course, setbacks are always possible. On the other hand, the expectation of rising prices and correspondingly higher nominal profits with interest rates remaining very low could drive valuations up even further. Relations of more than 150 percent were more frequently observed in similar constellations in the past.
The model takes this initial situation into account by "only" proposing a share quota of 60 per cent of the share component which the respective investor has identified as suitable for himself. As long as the economy does not deteriorate, this positive basic orientation will continue.
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.