Beginning of December is the right point in time to give some forecast for the upcoming twelve months. A consistent rise in prices in the years 2016 and 2017 was followed by a change in 2018. In the end, the events that led to higher volatility and elevated nervousness were not unknown. Central banks were receding market participants, increasing interest rates on the short end and becoming more demanding yields on the long end (at least in the US), tensions on international trade and a level in economic cycle and business life, delivered only limited potential for further improvements. Stockholders started selling positions in third quarter 2018. After partly hefty corrections investors have to deal with the crucial question: Was it just a correction (=buying opportunity) or was this the beginning of a new trend (=start of a bear market after 10-year bull market)?
Having a good balance within macro- and corporate situations, it is hard to set forecasts for mid-term price targets. But there are two factors, which could give a clean support: How will US-Fed act and will there be political unity on the topic “international trade”. Suspending to raise interest rates in 2019 would be seen positively by investors (albeit it would be a sign of a weakening economy). In this case even monetary activities couldn´t be ruled out in mid-term. From 2009 to 2018 it was clearly shown, that central banks can take decisive roles as market participants. On the other hand investors were getting used to the topic “international trade”. From the second half 2018 the market started adjusting to issues which were supposed to stay for longer (at least until 2020). Negative announcements on a single basis could not spark high selling pressure any more, but all in all they stressed the market and helped to impede a rebound of the market. Economical pressure also increased on company levels, which supports the odds to find friendly agreements between US/China and US/Europe. Investors should see those facts positively.
Author:
Bernhard Ruttenstorfer
Senior Fund Manager
Erste Asset Management
5 December 2018
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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.