The new year is stuttering along. While the year-end rally was driven by the hope of quick interest rate cuts, minor tones are now prevalent again. Because the inflation data is pointing in the wrong direction, price increases have increased slightly again. Actually not unexpected, because higher wages are being enforced everywhere, which is driving up inflation. In addition, the attacks by the Houthi rebels on shipping traffic in the Red Sea are beginning to have an impact because the ships now (have to) take the longer route around the Horn of Africa. This not only increases costs, but also takes much longer. Which puts a lot of strain on some supply chains. Tesla’s factory in Grünheide is not the only one to suffer as it has to reduce production due to missing parts.
On the other hand, energy prices continue to be relaxed and rents in the USA are no longer increasing as much, while the first price wars are being observed for food. This slows down inflation. But that’s not enough. The stock markets had already priced in the first interest rate cuts as if they would take place on January 2nd, even though they were only announced for the second quarter. Now it could even take a little longer, because while the inflation rate is not falling any further, the US economy and loan defaults are showing robustness. So there is no reason yet for the Fed to ease interest rates.
These prospects are not well received on the stock market and are dampening expectations. At the same time, the new earnings season recently started and there is not much potential for positive surprises. So everything looks dark? Not at all. But the stock market investors can put the dreamed-up new ‘Goldilocks scenario’ back in the closet and prepare for the harsh reality: the companies have to prove themselves in a challenging environment. Not everyone succeeds in this and therefore informed stock picking remains the top priority. This means: (Only) the best companies belong in the portfolio, risk appetite should be further curbed, patience and perseverance remain the key to stock market success. And don’t forget: anticipation is the best joy!ツ
Michael C. Kissig
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After completing his banking training, Michael C. Kissig studied economics and law and today works as a management consultant and investor. In addition to his value investing blog “iNTELLiGENT iNVESTiEREN”, he regularly writes a column for “Aktien Magazin”.
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