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The best-known stock market rule is repeated for the stock markets: “Sell in May and go, but remember to come back in September!”
And she had also voted primarily. Over a period from 1971 to 2019, the performance of the MSCI World Index was better in two thirds of the years in the winter semester than in the summer semester.
But what is the value of a rule in the days of COVID-19, with a small virus that managed to shut down the entire global economy in a few weeks? But isn’t that also the other way around?
Equity markets: is there a new phase now?
From a sober point of view, a phase of reality could now enter the stock markets after the extreme panic in February / March and the exuberant recovery of aid until the end of April. Was not the month of April in its development an extraordinary period, or even a period of superlatives?
Let’s consider the DAX first. After falling 40 percent in a few weeks, it rose from its low of 8255 points to 11,235 points on March 19, a move of 36 percent last Wednesday, even in a bear market rebound. And this, in a phase of constant gradations of economic growth, is expected to be the worst recession since World War II, a falling Ifo index, even in its component of expectations for the coming months, and a labor market in which the I work in the short term in a third of the companies.
There was a similar development in the world leading S&P 500 index. A drop to a record high of just 10 percent last Wednesday, how is that possible? With an expected economic drop of at least six percent this year? In the big financial crisis, the US economy contracted 5.1 percent in 2008 and stock markets faced less than 54 percent.
I already pointed out the big differences on Thursday:
Rescue packages in historically unique dimensions, hope that the virus will be contained soon, and a U-shaped economy recovery with no investment interest available as a competitive investment for capital collection points.
In the $ 25 billion index with its five heavyweights: Amazon, Apple, Facebook, Google, and Microsoft, which only account for more than 20 percent of the US index. USA And by the way, also an extremely high weight on the MSCI World index, after all the United States recently accounted for with 63 percent market capitalization. The propensity to buy these securities was not as “on” as the latest quarterly figures show. After all, unimaginable central bank bailout packages and dramatically low investment rates from junk to triple A have created a quintessential investment emergency. Where are you going in times of global closure, in high technology and large pharmaceutical companies?
But now that the good has been valued (more), the reporting season has peaked: a news sale could be used for the stock markets, making a profit from those who already made a small percentage of the profit.
In my opinion, the evaluation criteria, such as the price-earnings ratio or the drop in sales, are completely irrelevant, because if I force the aviation industry to kneel, for example, I will get completely abnormal indicators. What if I reach 30 percent mini-flight in two months, will I have a 500 percent increase? We are not currently experiencing a normal recession.
Covid-19 containment or second wave?
However, the most important issue for stock markets is the corona virus and its containment. How often do virologists and governments signal the danger of a second wave after the first steps of relief these days? But: how can it be that a giant country like China, with 1.4 billion people, still reports 531 (!) Active cases two months after the end of the blockade and not the beginning of a second wave? All false?
There are now clear signs of relaxation almost everywhere: countries like Taiwan, Hong Kong, South Korea, New Zealand, Australia, Vietnam, Thailand, Malaysia, Switzerland, Austria, Denmark, Norway, Finland, Luxembourg, Ireland, Iceland, but also Germany, report clearly decreasing infection cases (active cases). Even the concerned states of Italy and Spain are showing clear signs of relaxation. The biggest concern remains the United States, which has reported about 30,000 new infections a day across the country for more than four weeks, almost a constant. And recently Russia, where the numbers continue to rise tremendously.
