The markets are stabilizing? Is is the timing to invest?
Chart of the week
The chart shows the course of the S&P 500 Index since 2009. Marked are the "supposed" crises why one should have sold.
Why this is important
There is always a reason to sell. But those who sold at the times shown above were mostly wrong. Most of the time you get back in too late, at a higher price than you sold.
Long-term investing brings more returns than reacting to short-term trends.
This chart shows the current and intermediate-term trend of CNN Money's Fear and Greed Index. Investment sentiment remains poor, but this has often been a good time to enter cautiously.
Markets are stabilising
Market activity is still strongly determined by the news of the Ukraine war. Thus, a first meeting of foreign ministers provided hope that the war could end soon.
Important for a diplomatic solution is to give Putin a way to lose no (or little) face. Currently, however, no efforts to do so are discernible. We therefore do not expect a quick diplomatic solution. This is also likely to mean that the markets will remain very volatile.
Impact of higher energy prices on the economy
The biggest problem for the markets continues to be the sharp rise in oil prices. It is now starting to become clear how investors will deal with this and what new expectations will be hit.
The chart shows how strongly capital investment (Capex, blue) and consumption (Consumtion, red) have reacted to a rapid change in the oil price (positive and negative). The current forecast appears to be the strongest in nearly 20 years by historical standards. As a result, gross domestic product (GDP) could be almost 1% lower.
The chart shows the growth of the gross national product in the US and the expectations of the investment bank Goldman Sachs. It often made very accurate forecasts in the past. After 6% growth in Q4 2021, there is now a sharp correction. This will also have an impact on companies, which will be able to grow less strongly or will have to reckon with higher energy costs.
Citibank's chart shows how many companies raised or lowered their earnings expectations respectively. Last week was the first time since September 2020 that the cuts were higher than the increase in earnings forecasts. This points to how the current crisis is spreading through the energy price to the entire global economy.
What we are currently seeing is a normal process in times of crisis. After a sharp downturn, the new risks are incorporated into expectations. This then forms the basis for stabilization and a renewed rise.
What currently needs to be noted, however, is that we have a Black Swan event. The term was defined by Nicholas Taleb and refers to an event that has never happened before. See more on Wikipedia. Such an event was also the financial crisis or the terrorist attacks on September 11, 2011.
First investments in clearly defensive sectors can be indicated but one should enter only very cautiously.
Next week follows on Wednesday the monthly meeting of the U.S. Federal Reserve. An oil price that rises as sharply as we are currently seeing is in fact already equivalent to an interest rate hike. Therefore, we could well imagine that the Fed will refrain from raising interest rates, or if so, then only by 0.25%, although most investors expect a hike of 0.5%. This could give the markets another basis for recovery.
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