View of a hot autumn
Party mood on the stock exchange – can that go well?
By Daniel Saurenz
8/19/2022 3:34 p.m
Fear of recession, weakness in China, monster energy crisis: the conditions for a good stock market year in 2022 are extremely bad. But in the summer there will be celebrations again, and for the past two months the stock markets have been going up. How does that fit together?
Anyone looking at the DAX in mid-August might get the idea that things have changed for the better. In early summer it was still 12,400 points, now in midsummer it is almost 14,000 points. The US technology exchange also knows only one way: steeply upwards. Within a few weeks, the Nasdaq Composite rose by a good 20 percent.
So-called meme stocks such as Gamestop or Bed, Bath & Beyond are being gambled on again in the USA as if the stock correction in the spring had never happened. “The party mood is back and in the USA the volatility, i.e. the fear premium, has fallen to its lowest level of the year,” explains Jürgen Molnar from the broker RoboMarkets.
The turnaround in interest rates is in full swing and there is a big question mark as to whether a soft landing in the USA is possible without a recession. How does that fit together?
Short squeeze drives prices
Most recently, the effects on the stock market were “above all a covering of short positions and thus a so-called short squeeze,” says Stefan Riss from the fund house Acatis, describing a special feature that is currently driving prices. In addition, turnover on the stock market has recently been very low. In such situations, it is enough for upward swings when hardly anyone wants to sell and those who had previously bet on falling prices have to cover their positions again.
That drives the listings. At the end of the summer, however, comes the endurance test, both in the USA and in Germany. Because the gas crisis, raw material prices, inflation, interest rate hikes, the political environment with midterm elections in the USA and the Ukraine war as well as recession worries need to be managed.
Even the large S&P 500 may appear relaxed with its 4300 points, but the many construction sites cannot be ignored – not even for the stock market. “At least, thanks to the very low volatility, investors can hedge themselves more cheaply again,” explains Sebastian Bleser from UniCredit, explaining one advantage of the recent rise in prices.
Put warrants are cheaper to have when the fear premium is down. This is also reflected in the Fear & Greed Index from the USA, which recently posted a multi-month high. Fundamentally, the corporate profits of US companies are still quite high in the estimate.
Autumn could be hot again
Negative surprises are possible, and anyone who wants to tighten their portfolio for the last third of the year should do so now. Jürgen Molnar sees a major problem for Germany in particular in the fall: “You can duck away from many raw material bottlenecks, but this is not possible with gas supplies. Recent concerns in this area could quickly cost the DAX several hundred points again,” says the capital market strategist.
If you want to secure your portfolio, you have good chances with put warrants with a term of March 2023 or June 2023. On the DAX you choose the WKN VX887D with a base of 13,500, on the S&P 500 a well-rated put with the WKN JA1TRY and a base of 4000 points is an option. This way the depot will get through the possibly stormy autumn better.
Daniel Saurenz operates the stock exchange portal Feingold Research.
This article does not constitute a recommendation to buy or sell individual shares or other financial products. No liability is assumed for the correctness of the data.