FRANKFURT (DEUTSCHE-BOERSE AG) – Fund manager Peeters sees many factors influencing the state of the stock markets beyond geopolitical and economic policy, and more than is publicly discussed.
November 1, 2023. FRANKFURT (pfp Adisory). I recently saw one of the big TV news programs with “Switch” on the stock market correspondent in a hotel by chance. Because I don’t usually watch these programs, I hadn’t seen this embedding of the capital market in news programs “for the masses” for a long time and was promptly surprised. The previous article was about the latest presentation of the plans on how the incumbent department head Robert Habeck wants to transform the German economy. I found these plans to be neither new nor concrete.
The moderator/stock market correspondent duo probably saw it differently. The price movement of the day (one of the few positive days in several weeks with otherwise mostly falling indices) was practically monocausally linked to Habeck’s presentation. There was still speculation as to whether the impact in index points was appropriate. My intuitive thought was something like “they’re funny, maybe they should take a look at the current yields on US bonds, which today are further away from the magical 5 percent mark.” In my opinion, that was the main influencing factor for trading that day.
Then I turned off the TV, left the hotel and reflected on my thoughts again. Not that I wanted to assign more relevance to the thesis paper when reflecting, but it’s probably not “just” the interest rates either. Neither on that day nor in general. At the moment we are experiencing a diverse range of influencing factors that are not always trivial to categorize. In addition to the focus on the central banks/interest rates/inflation complex, geopolitics, including the crisis in the Middle East, is an unpredictable variable, not only in terms of its effect on the price of oil. The economic situation, which is on the verge of recession in many countries, is of course relevant, as are the heterogeneous company valuations. And of course politics has a significant influence on the economy and the stock market at the moment, although rarely a positive one, at least here in Germany.
One can think or speculate a lot about the many influencing factors, only briefly touched upon here. I am critical of the latter’s chances of success, which is why I once again consider our “bottom-up” approach, which is consistently implemented at pfp Advisory, to be the better approach in the long term. Nevertheless, dealing with the matter naturally ensures that you at least always think about macro events.
And what strikes me about many factors in the current phase: Certainly not all, but significant determinants can reverse their effect quite easily and, above all, very quickly. Less the really complex questions in geopolitics, but certainly the approaches of the central banks or the attitude of politicians towards the economy: especially in Europe and especially in Germany, people have had different priorities in recent years and have also suffered significant damage to the capital stock in purchase. If the government were to change course, also driven by disastrous survey results, or if the sovereign (i.e. the people) were to install a different government sooner or later, the economy would actually have a tailwind instead of permanent headwind, which the markets would probably also reflect.
In short: Even if the situation on the stock market is confusing and the trend is difficult these days: I would not be surprised if even a few selective changes would lead to clear and lasting trend reversals in severely shaken markets.
by Roger Peeters, October 30, 2023, © pfp Advisory
Roger Peeters is managing partner of pfp Advisory GmbH. Together with his partner Christoph Frank, the expert who has been active on the German stock market for over 25 years manages the DWS Concept Platow (WKN DWSK62), a multi-award-winning stock-picking fund launched in 2006, as well as the pfp Advisory Aktien Mittelstand Premium, which was launched in August 2021 ( WKN A3CM1J). Further information at www.pfp-advisory.de. Peeters continues to be a member of the board of the German Association for Financial Analysis and Asset Management (DVFA) eV Roger Peeters writes regularly for the Frankfurt Stock Exchange.
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