From an investor's point of view, you get the impression of a market that has gotten a little bit out of hand, even previously seemingly reliable indicators are not working the way it used to be. Like often markets operates in a "boom and bust" mentality. Towards the end of the previous year, signs of an economic slowdown and a more restrictive FED policy became quite clear. Europe was also burdened by the budget dispute with Italy, the trade tensions with the US and Brexit. As a consequence stock markets delivered the second worst final quarter in 30 years. With the exception of the FED policy, FED Governor Powell – also under pressure from Donald Trump – became more neutral, everything went as expected. GDP estimates were further reduced until April, Brexit is still in discussion, and the trade dispute is not resolved. The equity markets ended the first quarter with double-digit gains near the levels of early 2018, with the exception of export-oriented indices, DAX and ATX. The main reason for the increase was the relief that Europe is not steering into a massive recession, and the previous price slump was exaggerated.
The fairway should now be calmer, but there are still numerous bumps on the road. Political factors will remain market-influencing, but apart from that, the data seems to be stabilizing. The global central banks remain expansive or neutral, purchasing managers' indices are bottoming out, and earnings estimates are also increasing slightly for the first time since a year. Europe seems to be avoiding a recession. Large institutional investors reduced risk in the downturn, but missed the entry at the beginning of the year. The further the rally goes the more likely a re-entry will be, any setback will be used to build up positions and hence support markets. After the crash last year and the rebound in spring, the rest of the year should be quieter, of course politics remains unpredictable.
Author:
Horst Simbürger, MSc, CEFA
Managing Director
CONVERTINVEST Financial Services GmbH
6 May 2019
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Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.