Weekly Outlook: Use price fluctuations for purchases

Weekly report courtesy of Eurex

The markets are “out of the woods, but not necessarily dry yet”, it is said. Further fluctuations are expected, but no major correction. The fundamental conditions are too good for that.
 

12 August 2024. FRANKFURT (Börse Frankfurt). After turbulent days with heavy losses and a strong countermovement, things look more normal in the new week. “Investors’ concerns have dissipated somewhat,” explains Helaba analyst Claudia Windt. Standard stocks have been snapped up again. “As long as the US recession worries turn out to be exaggerated, the stock markets should be able to calm down.” Commerzbank also believes that the calming of sentiment will continue this week. “A return to fundamentals is underway,” explains Thorsten Weinelt. The markets are “out of the woods, but not necessarily in the dry yet”. “Seasonally, the summer period is one of the weaker ones and the slowdown in US growth is now here, even if the fears of recession seem exaggerated.” There are also still five weeks to go until the “upbeat” Fed meeting. “This period is likely to remain volatile.”

The DAX, which fell towards 17,000 points a week ago, stands at 17.800 points on Monday morning – after 17,723 at the close of trading on Friday. The US stock markets ended trading on Friday with slight gains.

“Correction potential limited”

According to DekaBank, the correction was triggered by concerns about the US economy, but the real reason was the necessary adjustment of sentiment in individual market segments. “In particular, the technology and platform companies that dominate the market are under pressure to adjust,” explains chief economist Ulrich Kater. For the stock markets as a whole, the potential for correction is fundamentally limited. “Global growth is intact, corporate profits are rising slightly, the central banks are cutting interest rates and valuations have fallen back below their long-term averages with the price correction,” explains Kater. The increased price fluctuations should therefore be used for regular purchases. The bank sees the DAX reaching 19,000 points in six months and 20,000 points in twelve months. 

Time for stock picking

According to the fund company DWS, the correction was also overdue – despite all the positive prospects for artificial intelligence. However, the developments clearly show that broad diversification is important when investing in equities. “Investors have been very successful in the past two years even without diversification, provided they have invested in the major technology stocks,” explains equity fund manager Madeleine Ronner. In the long term, however, sensible diversification within the equity asset class is a must. Stock picking is becoming more important again, i.e. the targeted selection of individual stocks. For example, the US market is only partly highly valued, while some things are interesting from a valuation perspective – such as medical technology and transportation. “There are also exciting sectors that have nothing to do with AI, such as the aerospace industry,” says Ronner. 

Important economic and business events of the week

Tuesday, 13 August 

11.00 am. Germany: ZEW Economic Sentiment August. Things are anything but going well in Germany, explains DekaBank. Geopolitical uncertainties and weak economic indicators have cast doubt on the hoped-for recovery in the third quarter. This is reflected in falling survey indicators and will also be seen again in the ZEW economic survey.

Wednesday, 14 August

2.30. pm. USA: Consumer prices July. According to Commerzbank, inflation in the USA has calmed down considerably, which the figures would confirm.

Thursday, August 15

4.00 pm. China: Industrial production July. Industrial production continues to be the most important pillar of the Chinese economy, writes DekaBank. Due to a base effect, the annual rate of change probably rose slightly in July. However, in view of the weak demand trend, no acceleration is expected in the coming months.

2:30. pm. USA: Retail sales July. According to DekaBank, US retail sales have probably risen relatively strongly compared to the previous month.  This was indicated by preliminary estimates and a significant increase in vehicle sales.

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