▷ Just a rally pause / commentary on the development of the stock market by Christopher …

10.12.2021 – 19:50

Stock exchanges newspaper

Frankfurt / M. (ots)

For the Dax, a nice annual finale seemed mapped out. Strong growth in corporate profits, the prospect of overcoming the pandemic in the coming year and the low interest rates or the lack of alternatives to dividend stocks all indicated that the soaring peak that began in October would continue. Not to forget the seasonality, i.e. the statistically above-average development of the stock market at the end of the year.

But the appearance of the omicron variant of the corona virus thwarted the market. Concern that the highly contagious mutation, against which the vaccines are less effective, could lead to extensive lockdowns and thus a severe economic setback, caused the Dax, which had reached a record high of 16,290 points in mid-November, to drop by more than 1000 points .

Even if the market has recently recovered significantly and there are signs that Omikron may hardly trigger any serious disease processes, it is currently still unclear whether the much-cited year-end rally will take place or has to be ticked off. Not enough data is yet available to be able to make reasonably well-founded statements about how bad Omicron is. It will probably be difficult for the Dax to reach another high this year, even if this cannot be completely ruled out despite a gap of around 670 points.

Not a black swan

Ultimately, however, that is not relevant. The decisive factor is that the current environment still speaks in favor of equities. Unlike the shocking Corona outbreak last year, Omikron is not the black swan that can drive the stock market into a bear market. Omicron and the fourth wave, driven by Delta, mean that overcoming the pandemic is dragging on. But it is only postponed, not canceled. Adapted vaccines will only have to wait four to five months, while around eight months passed between the corona crash of March 2020 and the vaccine successes from Biontech, Moderna & Co. In addition, the existing vaccines also protect to a certain extent against the course of the disease.

Postponed but not canceled also applies to other stress factors. The distortions in global supply chains and shortages of important goods such as semiconductors, chemicals and the like will also subside in the long term. Much of the economic activity now being lost to them will be made up for. It is true that the increased inflation is more persistent than originally thought. But it will also weaken again, if only due to base effects such as those assumed in Germany from the renewed increase in value added tax, however, it will probably not find its way back to the very low level of previous years.

Important drivers intact

At the same time, important drivers of the stock market are intact. It is true that the central banks have initiated the turnaround in monetary policy, especially the Fed, which is already scaling back its securities purchases. But they will be very careful about this. The US Federal Reserve will probably not raise its key interest rate for the first time until the second half of next year, with the possibility of postponing the first rate hike; the European Central Bank will not turn the interest rate screw until 2023. Monetary policy will therefore remain accommodative for the time being. Under these conditions, bond yields will only rise moderately and will therefore still be at a historically low level by the end of 2022. This means that stocks remain relatively attractive, especially as the continued growth in corporate earnings creates scope for dividend increases. Deka forecasts that the dividend distributions of the DAX companies will increase from 2021 to 2022 from 36.3 billion euros to a record high of 46.5 billion euros, even exceeding their previous high of 2019 by 7.1 billion euros.

The rally of the stock market has only been interrupted, not over, and the next Dax record will probably only be postponed until next year. Market participants can live with that.

(Börsen-Zeitung, December 11th, 2021)

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Original content from: Börsen-Zeitung, transmitted by news aktuell


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