The Advent calendar spreads anticipation every day and conjures up a smile until Christmas. In the no-spread campaign, discount certificates on the DAX (performance index) from the index asset class can be traded without a spread during the main trading hours of the underlying asset from December 17th to December 23rd.*
Consumer price developments in the USA inspire confidence
There were some important dates on the agenda this week. Above all, it is positive that inflation in the USA is showing downward trends, which means that the Fed’s central bank policy is having its desired effect. Starting from the peak in consumer price developments in the USA in June 2022, where an annual increase of 9.1% was recorded, inflation rates have tended to fall since then. Most recently, on December 12, the US consumer price index for November was reported at 3.1% on an annual basis, which was also below the consensus estimate of 3.2%. The Fed aims for price stability in the medium term with an inflation rate of around 2%. The Fed has now adjusted its estimates again for the coming year. For 2024, it now expects a lower inflation rate than previously forecast. The inflation rate is expected to average 2.4%, after 2.5% was expected in September. The Fed now expects an average inflation rate of 2.8% for 2023, after forecasting 3.3% in September.
The Fed is promising deeper interest rate cuts for 2024
On December 13th, the Fed left the key interest rate unchanged in the evening in the range of 5.25 to 5.50% for the third time in a row. It is the highest value in more than two decades. What is exciting in this context is that interest rate cuts are becoming increasingly likely in the next three months. The interest rate cuts over the course of 2024 could potentially be even greater than previously thought. A press release states that the Fed’s decision-makers are now expecting an average key interest rate of 4.6% for next year instead of the 5.1% communicated in September. That suggests about three rate cuts in 2024. According to the FedWatch Tool, a majority of 68.5% currently believe that the first rate cut could be announced on March 20 by 25 basis points to a range of 5.00 to 5.25%. As US Federal Reserve Chairman Jerome Powell made clear at a press conference following the interest rate decision, the members of the monetary policy committee also discussed the possibility of interest rate cuts. These statements have in turn aroused new buying interest among investors, as falling interest rates reduce companies’ refinancing costs, which in turn could have a positive effect on companies’ profit development.
ECB dampens the mood a little
Other central banks such as the Swiss National Bank (SNB), European Central Bank (ECB) and Bank of England (BoE) have also not announced any adjustments to their interest rate decisions this month. However, investors were a little disappointed with ECB President Lagarde’s statements. Although she left the key interest rate unchanged at 4.5% as planned on December 14th, she also stated that there had been no talk of interest rate cuts that day.
Around 21% this year!
In the current year, the German leading index DAX was able to achieve a price increase of around 21%. What is noteworthy is that the index was in an overarching corrective movement during the summer months between August and the end of October. Since then, an accelerating upward trend has developed, which has risen to new records several times in the last few days. Starting from the local minimum on October 23rd at 14,625 points, the index was able to achieve a price increase of over 16% in around one and a half months up to the local maximum on December 14th at 17,003 points, thereby achieving a large part of the overall annual performance. The trend is confirmed above all by buy signals from the GD 20, GD 50 and GD 200. If the DAX stabilizes at a high level in the coming months after the dynamic price rally, discount certificates could be interesting for such a scenario.
Product idea: Classic discount certificate on DAX (performance)
Discount certificates are an attractive alternative to investing directly in the index. Investors have access to a selection of corresponding products based on the underlying DAX (performance). An example is a discount certificate with the WKN: DJ7H98, which is due on October 4th, 2024 (repayment date). The investor does not receive any other income (e.g. dividends) and has no further claims from the underlying asset.
There are two options for repaying the certificate:
- If the final settlement price for options contracts on the underlying DAX on September 27, 2024 (reference price) is at or above the cap, the investor will receive the maximum amount of EUR 164.50.
- If the reference price is below the cap, the investor receives a repayment amount in euros that corresponds to the reference price multiplied by the subscription ratio. Investors suffer a loss if the redemption amount is less than the purchase price of the certificate.
A Complete loss of the capital invested is possible (Risk of total loss). A Total loss occurs, if the reference price is zero is. A Total loss of the capital employed also possible if DZ BANK as the issuer can no longer fulfill its obligations under the certificate due to official orders or insolvency (insolvency/over-indebtedness).
The discount certificate described here is aimed at investors who have an investment horizon until October 4th, 2024 and assume that the underlying DAX (performance) will be at or above 16,450.00 points on September 27th, 2024.
You can find a detailed explanation of the technical terms mentioned in our glossary.
As of: December 17, 2023, DZ BANK AG / online editorial team
* Conditions of Participation
The no-spread promotion runs from December 1st to December 24th, 2023. No new underlyings will be published on December 23rd and December 24th, but marketing replacements will be provided. The underlying assets mentioned during the promotional period can be traded without a spread for 7 promotional days. The date of publication plus the next 6 calendar days applies. The no-spread promotion applies during the main trading hours of the advertised underlyings and is limited to the quoted number of shares. DZ BANK reserves the right to end the no-spread campaign prematurely and without giving reasons. This applies both overall and to individual underlying values or to the shortening of the 7 days of action.
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