uand now? After two days of heavy price losses, the German equity market is also weaker. The Dax standard value index started trading on Tuesday with minimal advantage and was quoted at around 13,500 points shortly after the stock market opened, but then turned slightly negative during morning trading. Currently, the mood among investors tends to be gloomy, and not only in Germany: in recent weeks, prices around the world have fallen sharply.
One reason is the fear that interest rates will rise faster, especially in the United States, where the rate of inflation rose again last week to well over 8% – this is the highest level in 40 years. . Monetary authorities will meet in Washington on Wednesday to decide on monetary policy. It is now also considered possible that they may even increase the benchmark interest rate by 0.75 percentage points and therefore more than recently expected.
Wall Street prices fell sharply on Friday. And on Monday they also fell considerably. Stocks in tech companies were once again under pressure: their Nasdaq 100 selection index hit its lowest level since November 2020 and eventually lost 4.60% to 11,288.32 points. The market-wide S&P 500 closed after its lowest level since March 2021 with less than 3.88% at 3749.63 points. Compared to the January record, this also means a drop of more than 20 percent, which means that the stock market barometer signals a bear market by its usual definition. The leading Dow Jones Industrial Index lost 2.79% to 30,516.74 points. Sometimes it was at its lowest level since February 2021: the recovery in the second half of May has faded.
JP Morgan: the price drop in the last few days has been exaggerated
There is nervousness, «because in addition to the inflationary dynamics there are also signs of a decline in consumption. This would hit the economy twice and lead to economic downturns, “said Andreas Lipkow of Comdirect. Furthermore, the nascent Covid problem in China is making investors nervous.” In New York there is (also) the fear that even the Large-cap technology stocks such as Tesla and Apple, which technically have not yet formed a turnaround formation, ”added market analyst Jochen Stanzl from broker CMC Markets.
On the other hand, the market strategists of the US bank JPMorgan around Marko Kolanovi consider the drop in prices in recent days to be exaggerated. The significant losses and “sell off” of already more than adequately priced cryptocurrencies in a risk of recession. Experts are counting on a positive surprise from currency watchdogs and a recovery in prices in the second half of the year. This is supported by continued strong consumption, the economy is freed from the restrictions of the corona pandemic and economic stimulus measures in China.
They advise investors to focus primarily on stocks that now have relatively low valuations, such as highly innovative companies, companies with strong exposure to China, smaller companies and biotech.