For Jörg Krämer, Chief Economist at Commerzbank, the matter is clear: not yet. True, a lot of negative news has already been “priced in” and many institutional investors have already sold their shares. However, past experience has shown that the stock market bottomed out only when the US Federal Reserve has finished its rate hike cycle and is already thinking about cutting interest rates. However, this should not be expected – rather, it is the opposite. In any case, there is no end in sight to the interest rate staccato. Accordingly, he slipped German stock index fell further to its lowest level in nearly two years on Friday.
That he is doing so badly this year DAX, but also in other global stock markets, there are some obvious reasons besides the rise in interest rates: supply chain problems since last year, Russia’s war of aggression in Ukraine, which is causing energy prices to skyrocket, and as a tightening of monetary policy. This has reduced corporate profit margins. But most of the price losses have lagged behind the market, says Chris-Oliver Schickentanz, chief investment strategist at asset manager Capitell.
Realism is required
But two things are needed to reverse the positive trend, he says: “Analysts need to be a little more realistic in terms of their earnings expectations, which is they need to expect slightly lower earnings for DAX companies.” And the market must also adjust to the fact that central banks will raise the base interest rates even more than previously expected. Fed Chairman Jerome Powell made this clear a few days ago. Also European Central Bank while leaving no doubts about the course of its simplification. Because inflation in the euro zone must decrease to two percent, which was recently confirmed by Isabel Schnabel, a member of the ECB board. Schickentanz is convinced that if more realism returns to the markets, a bottom will be reached: “Then 2023 could really be a year of reconciliation for stocks.”
A view of the trading floor of the Frankfurt Stock Exchange
However, investing should not be limited to German stocks, warns Christian Kahler, managing partner of investment boutique Kahler & Kurz Capital. The market value of their shares, or market capitalization, corresponds to about 1.8 percent of the global stock market capitalization: “The German stock market has more or less fallen into insignificance in recent years,” says Kahler. One reason: the often export-oriented DAX companies are suffering from a weaker global economy and a strong dollar. As a result, the outlook for the DAX remains weak.
Better times will come
Unless the war in Ukraine ends soon: “In the long term, it makes more sense to diversify your portfolio much more internationally.” In addition, it is better to rely on selected “quality companies”. By this he means those companies that do not need a lot of money to grow, that require little capital to operate, and that can survive very well even with high inflation because they can pass on prices. They are currently as cheap as they were after Lehman. “You have to be interested in the stock market when everyone else is running,” says Kahler. And right now it is, as many investors are pulling their money out of equity funds. A lot of money is also tied up because many people have to save to pay for rising energy prices.
“The situation is very depressing today,” says the stock strategist. “But if you assume that things will improve in two or three years, then the stock market is the place to be, because future profits of the company are always discounted here,” he says optimistically.