Mixed feelings on the markets and the chance for a recovery rally
The markets are currently sending signals that are more divergent than ever. Risk assets like cryptos are either rising sharply or falling like equities. On the other hand, gold is functioning as a safe haven, while long-dated bonds are falling. “Everything is currently looking spellbound at the Middle East”, says Carsten Gerlinger, Managing Director and Head of Asset Management at Moventum AM. “The further development will decide the market direction – including the chance of a recovery rally.”
In the past few days, the price of bitcoin in particular has risen sharply. “On the one hand, this was due to the initially false news that the US Securities and Exchange Commission had approved an ETF on Bitcoin”, says Gerlinger. “However, these price gains were traded back quite quickly.” The subsequent rise shows great optimism. “Cryptos have always proved to be a good indicator of investors’ level of risk appetite in recent years”, says Gerlinger. “Accordingly, a higher risk level should actually be accepted.”
But the stock markets are signalling the opposite: “Here we have seen price losses in the past few days, the real risk appetite of investors seems to be rather low”, says Gerlinger. This is largely due to the armed conflict in the Middle East. “A spiral is threatening to get underway here that actually seemed to have been overcome”, says Gerlinger. “A further escalation of the conflict would certainly lead to a further increase in the price of oil.” This would lead to further increases in inflation rates, the central banks would have to react and postpone the round of interest rate cuts that had actually been initiated.
Another indicator also points in this direction: gold. “The price of gold has risen significantly in recent weeks, which indicates that investors are fleeing to safe havens”, says Gerlinger. “Parallel to this, long-dated bonds from the best issuers and with the best credit ratings should also be in demand.” But here again the opposite is the case, they tend to be sold – which leads to rising yields.
“Such strong inconsistency in the market does not happen often”, says Gerlinger. “This shows the deep uncertainty that currently prevails – and also depresses volumes.” The development in the Middle East will be decisive. “A further escalation is already priced in by the markets to a certain extent”, says Gerlinger. “If the situation eases, this would be traded back, a recovery rally would then still be quite possible in the last weeks of the year.”
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