16-08: Market Doubts

The financial markets experienced a volatile week. The market is doubting which direction to go. Below a short overview of what has been moving the markets and what can be expected in the upcoming week(s).
To find out which individual opportunities are arising:

What is moving the markets?

  • Recession fears
    Germany quarterly GDP was below 0. If we get another quarter in Germany below 0 we officially enter a recession. Fears of a recession and recent profit warnings of companies are fearing investors.
  • Bond yields
    Bond yields ave come down massively. German 10-year yield is around -0.80%.
    The US yield curve is inverting more and more! Investors are struggling to see long-term high economic growth and inflation. And see below a picture of the US 30 year yield that has been coming down and down.
  • ECBs next bazooka
    ECBs officials are pointing towards another massive stimulus package. In another so called last attempt to bring back inflation. Whatever it takes is still live.
  • Hong Kong chaos
  • US-China trade war
    Trrump is unpredictable and China does not like to get bullied. Trump needs to ease the trade war to get reelected, but when will he do so?
  • Company earnings
    Are getting impacted by the tariffs.. For example Macy’s reported disappointing earnings and lowered the guidance.

And now?

The main problem is that there are too many uncertain variables for investors to enter the stock market and to choose a direction. As you can see above there are so many factors playing the markets. In the end, most will come down to a solution in the trade war between the US and China. As long as there is not a strong belief that a deal will be made this year, the markets will experience high volatility and you will experience high swings in your portfolio.
Market shocks will be bringing opportunities. Some stocks will get punished too much by irrational behavior or illiquidity. To find out which opportunities arise, check the stock reports,
Short term trading is very difficult at the moment as you are depending very much on headlines regarding the US China trade war. For long-term trading, keep averaging down and do not read too much into every headline. Everyday there is a new surprise (or not).
Regarding a recession, yes it might happen. How long does it take? There is not much wisdom to communicate on this matter. Keep reinvesting the dividends seems a sensible thing to do. Do not let market fears affect your rational decision making.

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