Caught on the wrong foot
They were then caught on the wrong foot by the price jumps since October last year. They’ve been buying stocks successively since then, particularly since the spring pullback. This has fueled the recent rally. According to calculations by Deutsche Bank, the underweight has now become overweight again: The current positioning in shares is higher than in 72 percent of the trading days since 2010. The support for the market through further acquisitions should therefore decrease. From a purely statistical point of view, a setback in the S&P 500 is now overdue: On average, it has fallen more than three percent below the respective interim high every 47 trading days since the Second World War. This hasn’t happened since mid-March.
DAX: From all-time high to all-time high – profit-taking
Conversely, this means: Everything is waiting for the correction. And there are early signs. For example, the DAX, which has just celebrated its 35th birthday, has stormed from all-time high to all-time high in recent weeks and months. Until the investors suddenly noticed: Hello, there was something! Inflation is still high. In June, the inflation rate in Germany was above that of the previous month for the first time since February. In June, consumer prices rose by 6.4 percent year-on-year – in May the annual inflation rate was 6.1 percent. This puts the central banks – at least the ECB – under further pressure. Further rate hikes are likely to follow. And last but not least: The German economy is in a (technical) recession. First of all, profits were taken. Better safe than sorry.
The “Magnificent Seven” as drivers
On the other side of the Atlantic, things are a little different. In the frenzy of enthusiasm for artificial intelligence, the “big techs” in particular have pushed the prices up further and further. But it is actually only the “magnificent seven” Apple, Microsoft, Nvidia, Alphabet, Meta Platforms, Amazon and Tesla that are driving the upswing. They are responsible for most of the gains on Wall Street and Nasdaq. But with all your imagination: Even with them, the prices will not forever rise to the sky.
Slump in mood – an anti-cyclical reason to buy?
There are already first indicators that the party will soon be over. In its most recent survey, the specialist for sentiment analysis and behavioral finance, Sentix, found that even slight declines in the S&P 500 quickly raise fear among investors. Statistically, this level of sentiment is a clear anti-cyclical argument to buy – especially over the next eight weeks, according to Sentix. A slump in sentiment of minus 35 percentage points within a week should already be seen as a warning sign. The study is similarly cautious for the DAX and the indices in Euroland.
So now it’s time to wait for the correction. We are prepared. We are not fully invested in our Frankfurt equity fund for foundations, but are still keeping our powder a little dry. Because if there is a correction, we are already looking forward to “buy the dip”, i.e. anti-cyclically
invest. Because: If everyone is afraid, then we buy more or invest in promising stocks that are currently simply too expensive.
„Buy the Dip“ auch
beim ETF?
The situation is different with our Frankfurt UCITS ETF – Modern Value. It has just turned 1 year old and has increased in value by more than 20 percent during this time. It’s always fully invested. Should there be a correction on the stock exchange, one or the other investor could come up with the idea: Fully invested? Then buy the dip!