Market Monitor
01/2017

Last year financial markets were heavily politically influenced. BREXIT in June which surprised most investors led to tension in the market. The presidential election in the United States of America also showed an outcome which was not expected by most of the market participants.

The forecasts of most analysts of a sharp market correction in case of the election of Donald Trump as US-President were wrong. Intraday we saw a dip on the downside, followed by a quite bullish phase. On 20th January Donald Trump was inaugurated as the 45th President of the United States of America. Emotional discussions before led to speculation and we expected from the 1st speech as President clear comments to his politics and economic course, getting a sign for the direction of financial markets for the next couple of months, always depending if market participants interpret this positive or negative.

No clear statements but bullish markets could be observed. How long will that last?

The Italian referendum in December had no big influence on the capital markets. In 2017 we do have elections in European countries like France, Germany and Netherlands which could eventually lead to significant reactions in financial markets, as they are all important strategic partners in the EU.

Good economic figures in the US, solid economic figures in Germany and positive news from the Chinese Economy give us hope for a positive trend. The spectre of deflation should vanish and it looks like inflation could be an issue again. The positive environment sidetracks right now from risks, which are on one hand the course of the new US administration which cannot be predicted at this stage and on the other hand the uncertainty how the political picture in Europe will look like after the elections in France, Germany and Netherlands, as well as the unsolved troubles in connection with BREXIT and the Italian situation.

Increasing inflation will lead to rising interest rates. Risk diversification and a neutral, slightly optimistic positioning seems to be opportune to participate from a positive trend. Our hedge concept should protect us from possible draw downs.