Weekly outlook: “Air soon clear for new acquisitions”

The DAX is robust at the start of the week, despite concerns about an escalation in the Middle East. However, the situation on the markets is not stable. In the medium term, however, many are confident.
 

15 April 2023. FRANKFURT (Börse Frankfurt). April continues to bring mixed news; after two weeks of price corrections, the all-time high remains a long way off. Iran’s attack on Israel is also currently causing concern. “At the start of the week, market participants seem to be assuming that now – hopefully! – no further immediate escalation should be feared for the time being,” comments Deutsche Bank. When it comes to key interest rates, the ECB opened the door wide for a rate cut last Thursday. In the USA, however, the latest inflation data does not suggest that interest rates will be cut any time soon. And confidence is actually high for the quarterly reporting that began on Friday, but so far banks have disappointed with their figures and outlooks. 

The DAX stood at 17,969 points on Monday morning after closing at 17,930 points on Friday. On Friday, the Dow Jones fell to its lowest level since the end of January, while the S&P 500 and Nasdaq also lost ground.  

Valuations have risen sharply

Andreas Hürkamp from Commerzbank points to the significant increase in valuations, which are now around their ten-year averages. “The price/earnings ratio for the DAX has risen from 10 to 13 since fall 2023 and the price/book ratio from 1.3 to 1.6,” explains the analyst. In addition, the DAX dividend yield has fallen from 3.8 to 3 percent. In addition to the recent rise in bond yields, this is a brake on the DAX rally, which is why it has lost momentum. In addition, investor sentiment is signaling a breather after the strong performance in the first quarter. This could well last for several weeks.

 “Appealing ingredients for rising equity markets”

“Equity investors sometimes reassess the over-optimistic US interest rate cut expectations,” comments Robert Halver from Baader Bank. Price fluctuations are therefore to be expected depending on the fluctuating news situation. The sharp rise in net long positions on the US equity market in the meantime needs to cool down anyway. “In the past, however, it has been shown that the process of profit-taking runs its course quickly,” emphasizes Halver. After that, the coast is clear for new purchases. “Because the ingredients for a rising trend on the stock markets – including interest rate cuts by the ECB and later the Fed, global economic recovery, cyclical stocks that are still attractively valued – remain attractive.”

“US economy and interest rate cuts provide support”

The US reporting season is picking up speed this week, with Goldman Sachs, Morgan Stanley and Bank of America, among others, opening their books, and ASML and Sartorius in Europe. According to Sören Wiedau from Weber Bank, the consensus estimates for earnings growth for S&P 500 companies are 4 percent and for sales over 3 percent. “For Europe, on the other hand, profits are expected to fall by 14 percent, mainly due to energy and basic materials companies,” explains the portfolio manager. The bank remains optimistic about the stock markets in the medium term. The robust US economy, the strong US labor market and interest rate cuts by the central banks will have a positive impact on profits and equity markets. In addition, the increased use of AI will lead to efficiency and productivity gains in many sectors and have a positive impact. “In the short term, however, there may be temporary corrections following the very strong rise in the stock markets.”