Indicators (still) defy the coronavirus.

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ifo konjunkturampel Feb2020Dear readers,

In February, business expectations in the industrial sector continued to improve (blue line in the chart below). The ifo economic traffic light also remained in the "green" range. The trend reversal in the industrial sector announced two months ago thus appears to be still intact.

The German economy seems to be unimpressed by the development around the corona virus, writes the ifo Institute. However, it is doubtful that this will remain so. This is because the recent spread of the virus in Italy was not known at the time of the survey.

In the meantime, more and more economists are predicting clear signs of a slowdown in the global economy. Increasingly, we are now even reading estimates which, on a quarterly basis (Q1 2020 compared to Q4 2019), assume a massive slump in growth rates or even a decline in China's national product. In Italy and Germany, there is also a risk of bad luck in this case. We had already pointed out a month ago that corona weakness comes at a very bad time. After all, any upswing is very fragile at the beginning of an economic recovery.

ifo gewerbeindex feb2020At present, the imponderables are very great. The decisive factor for the economy will be whether there is a V-shaped recovery in the second quarter (similar to SARS). The decisive factor on the stock markets is whether investors will be prepared to overlook the expected earnings trough in companies. Finally, they are likely to face a number of sales and profit warnings in the coming weeks.

The ifo economic indicator, which can only show the long-term economic trend, would certainly give investors a sell signal too late if the problem were to worsen. This is why we are currently monitoring the results of the capital market seismograph, which is much more sensitive in the short term, even more closely than usual. this indicator is ultimately recalculated every four days and therefore reacts very quickly to changes.

As you know, the capital market seismograph distinguishes between three phases: "green" (calm market = buy), "yellow" (turbulent market with positive expectation = invest, but with hedging) and "red" (turbulent market with negative expectation = do not invest).

In recent months, the sum of the "good" probabilities has always been close to its historical maximum value. Even at present, this has only fallen slightly. The probability of a turbulent, volatile market with a positive trend ("yellow") dominates. The probability of a negative stock market environment began to rise only slightly to just over ten percent. "So the seismograph does not reflect the current panic mode of the capital markets. He continues to recommend an offensive equity weighting," notes Oliver Schlick.

Conclusion:

The private wealth stock market indicator had been out of the stock market since the end of February 2018. The three-fold increase in business expectations in the industrial sector led us to expect a turnaround in the economy and especially in cyclical stocks in December. This made it possible to increase the weighting of shares to 30 - 70 percent of the individually planned share portion.

Since the seismograph continues to suggest an offensive weighting of the equity component, the private-wealth stock market indicator still suggests a current equity weighting in the upper range of the bandwidth between 30 and 70 percent of the individually planned equity component. However, investors must be prepared for strong fluctuations. We remain on guard and will inform you immediately if the seismograph makes it necessary to adjust the equity ratio.

Your

Klaus Meitinger

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

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