After the strong finale on the world’s stock markets last year, we see reality and euphoria facing each other. The enormous money supply of the central banks and the large money volumes of private investors are the connection between these opposite poles. As long as the money printing machine keeps running, prices can continue to rise. Without this support, the air becomes thin.
If the S&P500 continues to run as it did in November and December, this would form a bubble in which the S&P 500 reaches twice the economic output of the US Economy. It is difficult to make predictions here, especially considering the current political situation. The escalation in the run-up to the inauguration shows how fragile the situation is. Where will the new president steer the U.S.? There is talk of tax increases. Inflation and interest rates are important aspects that will have an impact this year. We expect both inflation and interest rates to rise in 2021, which could weight on equity markets.
The S&P500 has been driven mainly by technology stocks. We believe that profit-taking is advisable here. Without the large technology stocks, the performance of the S&P500 is much more modest. Corrections in the over-performing sectors will lead to a normalization of the markets. Not a crash – but a normalization.
The S&P500 has clearly outperformed the European indices, especially the DAX, in recent years. We wonder whether the DAX will now play catch-up, or whether the S&P500 will converge with the DAX.
The DAX is not a technology-heavy index. Here, the focus is on other areas. The German industry is heavily dependent on German carmaking. Automotive stocks have recovered quite well over the past year after the massive downward trend of the past five years. The orientation toward e-mobility will give this sector new momentum. In terms of new registrations of e-cars and hybrid cars, Tesla’s market share has fallen from 17% to 9%. German automakers are focusing strongly on e-mobility and other alternative technologies such as hydrogen. This could spark new forces for the German economy. Experts agree. Nothing will work without hydrogen. Forecasts for the European energy mix indicate that the share of hydrogen will rise from the current 2% to 12 – 14% by 2050. The momentum will increase massively over the next few years.
Asia has been shining with enormous growth for years and has recovered from the Corona crisis more quickly than Europe or the USA. China and the Asian countries will be the drivers of economic growth in the coming decades. Europe must therefore position itself and not miss this train. We must be consistent with this fact and continue to increase the weighting of these regions in our portfolios.
Light and shadow will also accompany us this year. We do not see a big crash, but we do see correction potential, especially in sectors that are clearly overvalued. This means normalization. Sectors that are lagging behind offer us good opportunities for long-term success.