Stock exchanges take a deep breath with subdued optimism

The normalization after the corona pandemic is progressing more slowly than originally expected for many investors. After three months of relying on the great relaxation, it is time to take a deep breath.

The Dax curve in the Frankfurt Stock Exchange.

MSometimes you might think that the stock market is sensitive to the weather. When the temperatures dropped significantly at Easter, the stock market froze too. The Dax fell into a sudden paralysis and fluctuated by just 140 points until last Thursday, i.e. by less than 1 percent on eight trading days. This belongs to the top two percent of the quietest eight-day phases, but is by no means as unusual as you might want to believe, but it was the quietest phase since November 2019. Anyway, on Friday it seemed to be at a new all-time high End. However, it was probably only a brief twitch, especially since the new Dax high was inevitable. Strong growth in China and reports of high savings surpluses in America and Europe gave the stock markets a boost on Friday – at least for a day.

On Monday, however, normal operation prevailed again. The Dax resumed its sleepiness, which is of no use to it in the short term because, in contrast to all other indices, it calculates by reinvesting dividends. The fact that the stock exchanges currently appear a bit weak is probably due to the fact that, as is so often the case, they have run ahead of things.

Even if at the beginning of the year it was already stated in many outlooks that the great recovery would probably not occur until the summer, investors had hardly priced in the recovery as soon as the vaccinations against the coronavirus had picked up speed. Actually, this had already started at the end of last year, was only hidden for a long time by the rotation from the shares of the Corona profiteers to the normalization winners. But when problems and delays became apparent, the rally stalled. In a sense, the jetties are in the waiting room. You bought a ticket for the train to the post-Corona era, but now the express is delayed. Of course, you don’t give the ticket back because the train isn’t canceled. If there are rumors that it is pulling in, you sprint to the platform – just like on Friday.


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To the detailed view

After three months of rotations, which mainly benefited value stocks, corona losers and, most recently, infrastructure stocks, a more optimistic, but much more cautious and balanced investment is now dominating among professional investors, the fund company Lyxor recently wrote. Confidence seems to have temporarily waned.

The belief in a return of inflation is gradually being accompanied by more skepticism, sometimes there is talk of a “mirage”, whereby there would then be inflation, but not at the presumed point. While Germany and Europe are also suffering from delays on the way out of the pandemic, investors in America seem to be pricing in a more moderate recovery right now. Together with the higher valuation of the stock market there, this leads to a more leisurely but steady upward movement, as has been seen in the past two weeks.