Frankfurt In the past weeks there have been repeated attempts to recover the course, on some days one could believe that the corona pandemic has already been overcome. But on Friday, disillusionment returned – the collapsed ifo business climate index made the whole dilemma clear.
The course of the mood barometer looks like a “Highway to Hell”, was the analysis of the VP Bank. The index is now significantly below the values of the crisis year 2009. The simple message for the future was: “Massive income losses are imminent. We will all get poorer. This applies not only to Germany, but to all economies. ”Sometimes it is better to hear the unvarnished truth.
Other analysts and experts are also skeptical about the weekly outlook. Cautious savings by consumers and companies create a completely different economic and inflation environment than one knows from the post-war period, the analysts at MFS Investment Management believe.
They expect the earnings recovery to be weaker than the market and point to the possible dilution of earnings through capital increases. They particularly highlight 2008 as a comparison.
“When the extreme risk of the international financial crisis subsided, companies were no longer concerned with distributions, but with recapitalization. To this end, new shares were issued – at the expense of existing shareholders, whose capital was heavily diluted, ”said the investment professionals. The new wave of recapitalization has probably just started. In the past few weeks, leisure companies and service providers in the United States and Europe have already offered new shares.
Warning to bargain hunters
The BLI – Banque de Luxembourg Investments is also cautious. “The financial markets are currently giving the impression that they are underestimating the extent of the economic damage and are counting on a rapid recovery as soon as the containment measures are reversed,” is the BLI’s assessment.
Many investors are conditioned to view any decline as an opportunity to buy. However, the analysts recall that while the fall in share prices in February / March was dramatic, the valuations were also very high. As a result, the markets today are anything but cheap, especially after the recent price recovery.
Quality companies with a very solid balance sheet, one or more sustainable competitive advantages and the ability to self-finance should be preferred. The main factor that will continue to speak for stocks remains the low interest rate level and thus the lack of alternatives. At the same time, gold will become an “indispensable part of a balanced portfolio because of the inflation risks.”
After the significant recovery since mid-March, the European stock market has recently lost some momentum, the Weberbank experts believe. In addition, the balance sheet season that is already underway shows significant impacts on corporate balance sheets due to the global “lockdowns”.
Correspondingly, the analysts have also significantly lowered their profit expectations for industrial companies, but also for the banking and energy sectors. Due to the economic slump, banks faced increased write-downs on their credit books and the massive drop in yields clouded interest income. Most recently, they also negatively impacted the rating agency Standard & Poor’s (S&P).
The Deutsche Bank and the Commerzbank were therefore particularly under pressure on Friday “We continue to distance ourselves from these sectors and prefer creditworthy pharmaceuticals or companies from the non-cyclical consumption. In addition, titles from the technology sector are promising in our eyes, ”said the Weberbank experts.
Central banks meet worldwide
If the economic situation continues to be poor, the states and central banks will have to take further support measures. Robert Greil, chief strategist at Merck Finck Privatbankiers, sees an opportunity for this next week because the European Central Bank, the US Federal Reserve and the Bank of Japan are meeting.
“As a result of the unprecedented economic downturn caused by the Covid 19 consequences, all central banks will reaffirm their willingness to support,” says Greil. The economic downturn left neither governments nor central banks a choice but to take further measures to support and recover the economy.
The gross domestic product for the first quarter of 2020 will be published in the euro area on Thursday, and new growth figures will come in the US on Wednesday. Further important economic data in Germany are the preliminary inflation figures and the labor market report for April.
According to DZ Bank, the next quarter should bring an improvement in the economy, but there does not have to be a “V” or “I” recovery. This is not ignored on the stock market, many stocks are up to 80 percent down.
A large number of “mega-caps” hold up against this, mainly in the USA. Amazon, Google, Microsoft, Netflix and Facebook, but also Adobe or Comcast, be stable on the way. Things are also going well for the great values of the “old economy”, including Pepsico, Johnson & Johnson, Procter & Gamble, Home depot and Pfizer. The German Leading index Dax the strategists from DZ Bank see 11,200 points by the end of the year, and the S & P-500 for US equities at 2,800. This would at least stabilize in the medium term.
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