Saturday 19th December 2020
At the end of the year things are going uphill
Stockbrokers can hope for a new rally
The lockdown does not spoil the mood on the stock market, the Dax is coming pretty close to its high this week. Things should continue to be positive in the Christmas week – even if pandemic and Brexit worries dampen the mood a little.
A seamless transition from a year-end to a start-of-year rally: experts say equity investors can look forward to this. "The fundamental factors speak for a continuation of the friendly environment," says analyst Frank Wohlgemuth from the National Bank in Essen. Above all, this included the prospect of mass vaccinations against the coronavirus as well as further economic aid from central banks and governments.
"However, this is not a guarantee of an imminent attack on the all-time high," warns analyst Timo Emden from Emden Research. "The coronavirus pandemic remains too present. While the fear of the economic consequences of the second wave is masked by generous economic aid, concerns about a third wave could gain the upper hand again at the beginning of the new year at the latest."
By Friday, the Dax had gained around 4 percent overall. Over the course of the week, it temporarily moved up to around 20 points on its record high of 13,795.24 points. If it stays at this level, some investors could be forced to cancel their bets on a price decline and thus give the German benchmark index additional tailwind, says investment expert Joachim Goldberg of the consulting firm Goldberg und Goldberg.
Brexit drama and no end?
However, the second long-running issue of Brexit, alongside the pandemic, worries stockbrokers. Regardless of the ongoing negotiations on a free trade agreement between Great Britain and the EU, the decision on how the United Kingdom should leave the community of states has already been made, says Ayush Ansal, head of the hedge fund Crimson Black Capital. "Even if a trade deal is de jure, it will de facto be a 'no deal' Brexit because of the deep tensions between the two sides."
Naeem Aslam, chief market analyst at brokerage firm AvaTrade, argues similarly. "There is strong evidence that banks are withdrawing assets and employees from London. These wounds will not heal easily." A Brexit deal will therefore only give the pound sterling a temporary boost.
US labor market report casts shadows ahead
Traditionally, economic data around the turn of the year are few and far between. For this reason, stockbrokers are already turning their attention to the first important dates in 2021: the US labor market report on January 8th. Commerzbank experts predicted the creation of 200,000 jobs in December. "That would be just a little less than in November."
The data from the private employment agency ADP two days earlier provide a foretaste of these figures. Because of the increasing number of infections, the US economic engine is stuttering, added the Commerzbank analysts. But a recession is not to be feared. On this side of the Atlantic, the Mood barometer for the German and European purchasing managers on the schedule.
The industry remains optimistic, the Commerzbank experts forecast. This trend will certainly be due to the numbers for German Industrial production underpinned on January 8th. On the Tuesday before Christmas, the GfK index about the buying mood of German consumers. Because of the renewed lockdown, analysts expect a decline to minus 9.5 points from minus 6.7 points for January.
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