Gold under the spell of US monetary policy

Bars and Coins

The price of gold could soon hit the $ 1,900 an ounce mark again.

(Photo: obs)

Zürich The assumption of office by US President Joe Biden has so far not given the gold price the expected boost. As one of his first official acts, Biden announced a 1.9 trillion spending program and promised financial support in particular to poorer households. In response to the prospect of higher national debt, however, long-term yields on US government bonds have so far risen. Since gold does not generate any ongoing income, increasing returns put a strain on the price of the precious metal.

The yield on ten-year US Treasuries is over one percent and is trading at its highest level in six months. US government bonds with a 30-year maturity are trading at over 1.8 percent – as high as they were last at the end of February 2020. Financial market experts speak of a steeper US yield curve, with long-term yields rising faster than short-term yields.

The question is how long the US Federal Reserve can tolerate a further rise in yields in the face of rising national debt. This should also move the gold price in the coming months. This is underscored in a speech given by US Federal Reserve Chairman Jerome Powell a few days ago.

“It’s not yet the time to think about an exit,” said Powell, referring to the bond purchase program with which the Fed is pumping $ 120 billion a month into the markets. It has been interpreted as an indication that Powell is ready to use word and deed to stop US yields from rising further. US yields fell slightly after the speech, while the price of gold rose slightly.

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In the extreme, the Fed could go a step further and launch an unlimited bond purchase program to keep long-term yields within a set range. This form of interest rate curve control would probably be a driver for the gold price if Biden’s fiscal policy and economic growth after the corona pandemic were both fueling inflation.

No end of the loose monetary policy in sight

This is what Carsten Fritsch, commodities expert at Commerzbank, also expects: “With the signs of massive economic aid in the USA, the inflation risks are likely to increase.” An end to the loose monetary policy is not in sight. “The result would be even more negative real interest rates,” says Fritsch – this in turn makes gold appear more attractive in the eyes of investors.

Carlo Alberto de Casa, chief analyst of the broker ActivTrades, also expects that the gold price could soon return to the level of 1900 dollars per troy ounce (around 31.1 grams): “The momentum for a recovery in the gold price has returned, since the investors are relying on further monetary policy impulses from the central banks. ”From a technical point of view, only a drop to 1830 dollars would be an indication of a pronounced weakness in the gold price.

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Megan Shippman, an analyst at the investment bank RBC Capital Markets, believes that the gold price has barely moved so far this year as a snapshot. The statements by Fed Chairman Powell, but also the hearing in the US Senate of Janet Yellen, Treasury Secretary-designate in the Biden cabinet, should reinforce the upward trend in gold.

Yellen led the Fed before Powell. Like no other person, her appointment as finance minister represents the intertwining of monetary and fiscal policy. The cooperation should keep US yields in check – and for the precious metal, analyst Shippman expects: “It’s not over yet for gold.”

More: Gold could top its record high in the new year.

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Dax outlook: company figures determine trading

Tech corporations

Apple, Facebook, Microsoft and Tesla present their figures in the last week of January.

(Photo: Reuters)

Munich Last week, the international stock exchanges largely made up for the slight correction from the days before. For a short time, the Dax even jumped the 14,000 point mark again on Thursday before profit-taking came to the end of the week.

Experts see this as a positive sign for the last week of trading in January. A multitude of company figures determine what happens in the. They come mainly from the USA, where tech giants such as Apple, Microsoft, Facebook and Tesla present their balance sheets.

Because the expectations of the stock exchange traders are low after about a year with the pandemic, there is definitely potential for positive surprises. “The ongoing skepticism of the analysts increases the chance that the results of many companies will again exceed expectations in the fourth quarter of 2020,” says Jörg Krämer, chief economist at Commerzbank.

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Why US investors fear higher yields & inflation

A trader is discussing with a colleague at the New York Stock Exchange

Fears of higher inflation and concerns that bond yields will rise too sharply are growing in the US stock market.

(Photo: AP)

Frankfurt There are two ghosts looming on the US capital market that could also come to Europe with a delay: fear of higher inflation and concern that bond yields will rise too sharply.

The main trigger for the shift in the market was the election victory of the Democrats in the US state of Georgia, who won both seats in the Senate and thus a narrow majority there. This gives the new US President Joe Biden the basis to push through a spending package that was last put at 1.9 trillion dollars.

The Americans also speak of the “blue wave” – blue is the color of the Democratic Party. Matthew Luzzetti, US chief economist at Deutsche Bank, sums up the development as follows: “The blue wave in Washington has increased the prospect of another fiscal impulse and is again leading to fears of a noticeable inflation shock.”

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Future US Treasury Secretary: Willpower and humor: Janet Yellen campaigns for a more social economy in the Senate

The former head of the central bank is to become finance minister under Joe Biden. At an initial hearing, she woos the Senators’ favor and calls for new, large economic aid. .

Investors should look at the current rally with different eyes

Frankfurt Stock Exchange

The stock market is being driven by trillions in economic aid from governments and central banks.

(Photo: dpa)

It is no longer normal what happened on the stock markets this year alone. In fact, it’s pretty crazy and should make investors look at the current rally with different eyes.

Some examples from the young year: The Wirecard share rose at times by up to 480 percent to 1.81 euros, although the insolvent payment service provider is currently being processed. It may be normal for stocks like this to fluctuate in price, and it is not because the stocks were traded up to 50 million times a day.

In the US, investors even bought the wrong stock. They drove the price of the unknown medical technology company Signal Advance up 930 percent within two trading days. They actually wanted to buy shares in the Signal messenger service – but it is not listed on the stock exchange. Such a mix-up did not happen for the first time either – a large part of the price gains came about when the mistake was already known.

The rally was triggered involuntarily by Tesla boss Elon Musk, who advertised the messenger service on social media. Musk himself has meanwhile become the richest person in the world because the electric car pioneer’s share rose more than 700 percent within twelve months. To put it into perspective: Musk, who currently sells 500,000 cars a year with Tesla, is now richer than Amazon boss Jeff Bezos, who controls global online trade.

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Compared to hydrogen titles, Tesla is even rated moderately. The Plug Power share, for example, rose by more than 1500 percent in the same period, and the price has doubled this year alone.

Euphoric investors drive the prices

Yes, the future is traded on the stock exchanges, so the share price reflects investors’ expectations of the company. For many stocks, however, these expectations are so high that the potential for disappointment is huge. They are like a betting slip in sports betting, where wagers were only made on huge wins. That can happen, it probably isn’t.

That does not mean that there has to be a crash soon. The party can even go on like this for a while on a broad front, supported by trillion dollar economic aid from governments and central banks as well as by an interest rate policy that makes stocks without alternatives. As a result, new record highs are even likely.

The latest excesses, however, indicate that the market has entered the final phase of a more than ten-year rally, in the overall picture of which even the Corona crash was only a brief correction. In this phase, the rally is driven by euphoric investors, some of whom are even financed by credit for their favorite titles and who continue to jazz up the overall market. That is what anyone looking at the stock market should have in mind.

This mix makes high volatility and clear setbacks likely for this year. Should the US Federal Reserve then cut back its bond purchases, it should be uncomfortable – especially for the recently hyped stocks.

More: Investors don’t expect much from the Dax in 2021. According to sentiment analysis, the opposite is likely to occur.

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How central banks artificially weaken the currency

Frankfurt Usually politicians and central bankers are extremely cautious when it comes to exchange rates. There is a consensus among the most important economic nations: Nobody should gain advantages by artificially weakening their currency. Therefore, comments on the situation on the foreign exchange market are often considered reprehensible.

But the economic consequences of the corona crisis are eroding this taboo more and more, and it is no longer just about verbal interventions. Market observers agree that the Polish central bank intervened directly on the foreign exchange market at the end of last year in order to lower the rate of the zloty and thus improve export opportunities.

Economists at the US bank Citi estimate that the Poles spent almost seven billion US dollars on the interventions. The central bank chief of the country is keeping further interventions open.

Poland may be a particularly blatant case. But politicians and central bankers are also trying to influence the exchange rate more strongly in some emerging countries, in China, Japan and in the euro area. They are under pressure given the weak economy and the falling US dollar. There is a risk of a silent devaluation race – a kind of cold currency war.

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“The economic recovery threatens to drag on, and many central banks have largely exhausted their traditional monetary policy means,” explains Commerzbank foreign exchange expert Ulrich Leuchtmann. “Therefore there is a trend that more and more countries are trying to gain advantages by weakening their own currency.”

Leuchtmann sees especially smaller countries advancing, which do not belong to the G7 group of the leading industrial nations. He sees Poland as the clearest example. The central bank intervened there, although the zloty had not appreciated that much.

In 2020, the currency lost over six percent of its value against the euro. According to Leuchtmann, the only aim of the Polish central bank is to support its own economy. “This is pure expansionary monetary policy,” he says.

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The chief economist of the International Banking Federation IIF, Robin Brooks, compares the current situation with that after the financial crisis in 2009/10. At that time, many smaller countries intervened because the loose monetary policy of the Fed and the ECB pushed their currencies up. “We’ll see it all again now.” If a central bank has lowered interest rates close to zero, he believes the exchange rate plays a major role.

The Polish central bank is facing a similar dilemma as many other central banks. The key interest rate in the country is already 0.1 percent. The monetary authorities therefore no longer have much room for maneuver downwards.

You could lower the crucial interest rate like the European Central Bank (ECB) below zero, but such a move is considered risky because of feared negative consequences for the financial system. The central bank is already buying bonds on a large scale.

So the only last resort is the exchange rate to stimulate the economy. If your own currency devalues, your own exports become cheaper on the world market and thus tend to be more competitive – which boosts the economy. At the same time, imports from abroad are becoming more expensive.

Weak dollar strengthens many other currencies

The chief economist of the Berenberg Bank, Holger Schmieding, also emphasizes that the exchange rate plays a major role, especially for countries like Japan or the comparatively small Poland. “After the great recession, the temptation is great to secure a competitive advantage through the exchange rate.” For 2021, he expects the US dollar to depreciate further down to 1.28 per euro.

Since the approval of the corona vaccine, many investors have been betting on a rapid recovery in the global economy. That weakens the dollar, which is particularly in demand in times of crisis. In the current positive market environment, funds from the US government bonds, which are considered particularly secure, are flowing into other investments and currencies. If this development continues, it should weaken the dollar further. “It may well be that many countries – especially small open economies – will increasingly intervene to counter this,” explains Schmieding.

In Japan, Prime Minister Yoshihide Suga is said to have instructed the Ministry of Finance in November, according to the leading business newspaper in the country “Nikkei”, to prevent the dollar rate from falling below the 100 yen mark, in other words an excessive appreciation of the Japanese currency. According to a cabinet report, the Japanese export economy would have to accept losses at a dollar exchange rate below 103 yen.

But this calculation is controversial. Because compared to currencies other than the dollar, the yen has lost value again since its corona-related appreciation in the spring. It is currently trading at around 104 yen per dollar.

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The Japanese central bank last intervened directly in the foreign exchange market in 2011 after the nuclear disaster in Fukushima. At that time, Japanese investors withdrew capital from abroad on a large scale – which led to a significant appreciation of the yen. To counteract this, the Japanese central bank sold its own currency on a large scale in coordination with other countries.

From the point of view of Berenberg chief economist Schmieding, the exchange rate is particularly relevant for small and medium-sized economies that are very export-dependent. But even in large economic areas there is a tendency to influence it more strongly. In China, for example, the authorities and the central bank are also trying to curb the appreciation of the local currency, the yuan, which has risen by around ten percent against the dollar since its low in May.

For example, the Chinese central bank cut the cost of dollar purchases on the derivatives market in October. In addition, the regulators decided at the beginning of the year that Chinese corporations would be allowed to lend more money to their subsidiaries abroad. If the corporations take advantage of this leeway, additional demand for foreign currency arises, which weakens the yuan.

It is easier for China to influence the exchange rate because its currency, the yuan, is not freely tradable and the country does not belong to the G7 countries.

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But even in the euro area, representatives of the European Central Bank (ECB) have recently spoken more frequently about the exchange rate. When it briefly exceeded the $ 1.20 mark in September, ECB chief economist Philip Lane said that the exchange rate was relevant for monetary policy. What was understood by many to mean that the ECB could react if it got out of hand.

With the comment he only briefly ended the upward trend of the euro at the time. The euro exchange rate has now passed the mark again. In her statement after the Council meeting in December, ECB boss Christine Lagarde again emphasized that the euro exchange rate is important for inflation in the euro area.

The funds of the central banks

Commerzbank foreign exchange expert Ulrich Leuchtmann considers such purely verbal interventions to be ineffective in the current environment. “In the past, central banks promised to cut interest rates if they wanted to weaken the exchange rate,” he explains. At that time, they had real potential to threaten investors because there was still room for downward interest rates. Anyone who ignored the central bank’s warnings ran the risk of being surprised by such a move.

Currently, however, most economists see little freedom of movement for the central banks. In the euro area, for example, even at the height of the financial market turmoil in spring 2020, the ECB refrained from further lowering the deposit interest rate, which is decisive for monetary policy, from the current minus 0.5 percent. In many other countries, the central banks are already determined to avoid negative interest rates.

Another means that central bankers could use is to buy bonds. In theory, these measures also have the potential to affect the exchange rate. When a central bank buys bonds in its own country, it tightens their supply and tends to push investors more into foreign securities.

It also lowers long-term interest rates. The effect of bond purchases on the exchange rate is, however, controversial among economists, and this means is not even available to all central banks.

Theoretically unlimited funds

The alternative is direct intervention in the foreign exchange market. Berenberg chief economist Schmieding is convinced that even the plausible suggestion of major interventions in the foreign exchange market can have a lasting effect on the exchange rate and slow down an appreciation. But there are also different experiences with this instrument.

Central banks have often used the means to prop up their currencies and defend exchange rates – with modest success. The problem was always that even high foreign exchange reserves were quickly used up.

“As a rule, foreign exchange market interventions do not work if you want to support your own currency,” says Commerzbank foreign exchange expert Ulrich Leuchtmann. “On the other hand, it is entirely possible to weaken it.” In principle, a central bank has unlimited resources at its disposal.

One country that practices this on a large scale is Switzerland. Between 2011 and 2015, it even pursued a minimum exchange rate of 1.20 for its own currency against the euro, which it defended by buying foreign bonds and stocks. With the minimum exchange rate, the Swiss central bank (SNB) wanted to prevent the franc from appreciating too much. However, she gave up the exchange rate target because she was afraid of losing control of monetary policy.

Switzerland is an extreme case. Through its interventions, it has now amassed foreign exchange reserves of almost CHF 900 billion. The US Treasury Department therefore branded them as a currency manipulator at the end of last year. In view of the difficult environment after the corona pandemic, even more countries could be interested in their experiences with foreign exchange market interventions this year.

More: Chinese currency soaring – authorities and central bank want to slow the appreciation

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A rate hike is not to be expected

Jerome Powell

For the time being, the US Federal Reserve Board does not see any increased risk of inflation in the US.

(Photo: Reuters)

Washington According to US Federal Reserve Chairman Jerome Powell, full employment is far from being expected in the USA even after the end of the corona crisis. Even if there should be an upswing in the second half of the year, there is still “a long way to go” to this goal, he said in an online conversation at Princeton University on Thursday.

Against this background, interest rate hikes are also not expected “in the foreseeable future”. Turning away from the very stimulating monetary policy is out of the question until the job is “well and really” done.

Powell’s affirmation of the Fed’s ultra-loose long-term line weighed on the dollar. In return, the euro rose to $ 1.2171. At the meeting in mid-December, the US Federal Reserve already signaled that it would stick to its interest rate level near zero beyond the Corona crisis.

The number of initial jobless claims in the US has skyrocketed recently. And the unemployment rate was last at 6.7 percent. In their latest projections from December, the US monetary authorities expected an average rate of 5.0 percent for 2021. In 2022 it should then fall to 4.2 percent.

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More than 22 million jobs were lost in the United States during the crisis, of which only around half have so far been won.

At the same time, Powell does not see any increased risk of inflation in the USA for the time being. It could be that, in the short term, when the pandemic subsided, consumers plunged into a kind of buying frenzy. But even if this one-off effect leads to higher prices, this will probably not lead to an increase in the underlying inflationary pressures.

More: Higher US bond yields are making investors nervous.

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Higher returns make investors nervous

Frankfurt There is a high alert in the United States. Joe Biden will be sworn in as the new US President next Wednesday – just two weeks after an angry mob stormed the Capitol. Washington Mayor Muriel Bowser called the uprising an “unprecedented terrorist attack.”

Actually, this would be an environment in which investors in the financial markets shift their money from stocks to bonds. But the opposite is the case: bond prices fall and fall, especially in the US.

Since the beginning of the year, this corresponds to an increase in returns of around 0.2 percentage points and a price loss of around two percent. That doesn’t sound like a lot, but it’s a significant move in such a short time for US Treasuries.

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Carsten Klude, chief investment strategist at the private bank MM Warburg, states: “Instead of an escape to safety, we see an escape from safety.” This is all the more astonishing because the environment with the unrest in the USA and corona infections continue to rise Investors should actually have to invest their money in bonds in which they can at least assume a repayment of the capital.

Due to the economic strength of the USA, the dominance of the dollar and also the political stability, US government bonds in particular are considered safe investment havens in uncertain times. Despite the uproar instigated by supporters of outgoing US President Donald Trump, the reputation of American government bonds has not suffered.

Fear of rising inflation

Andy Cossor, bond analyst at DZ Bank, says: “Investors are obviously assuming that the US will get the unrest under control and that Biden will again unite US citizens more strongly.” Cossor reads this from the fact that the returns are also of other bonds that are considered safe, such as German Bunds, have risen – albeit not as significantly as those in the USA.

But the development has nothing to do with political stability, but with the economy. Specifically, investors in the bond market fear that the designated US President Biden will significantly increase government spending in order to stimulate the economy. “That would raise inflation significantly,” says Cossor. Experts call this connection reflation.

For Klude von MM Warburg, too, the increased inflation expectations are the main reason for the rise in bond yields. Inflation is poison for bonds because it eats away at the already meager interest income.

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Investors also worry that if the economy improves, the Federal Reserve could tighten monetary policy by buying fewer US Treasuries. This phenomenon, known as tapering, would push US yields even higher.

More government spending means more debt

US yields have been increasing more strongly since the end of October. At that time it became clear that the Democratic presidential candidate Biden had a good chance of winning the race for the White House. Since then, returns over a ten-year period have risen by 0.4 percentage points.

Investors sold more bonds early last week, and yields got another boost accordingly. The trigger is that the Democrats won the runoff election for two senatorial posts in the US state of Georgia. This means that Biden’s party now has a majority not only in the House of Representatives, but also in the Senate and thus in the entire Congress.

That means: Biden can implement his plans more easily – and actually put together larger fiscal packages. This means that US debt will continue to rise.

The US Congress had already passed a new corona aid package worth 900 billion dollars at the turn of the year. It is already clear that this package will not be enough to sustainably support the US economy. Biden can now get more help with the help of Congress. The US bank Goldman Sachs estimates that the aid package will be increased by $ 750 billion in February or March.

Biden has also already announced that it will increase direct financial aid for US citizens from the current $ 600 to $ 2,000 per family. His election manifesto envisages spending of four trillion dollars by 2024, two trillion of which will be invested to curb climate change and make infrastructure greener.

Fear of reflation

All this has increased the fear of reflation. Economists pay particular attention to the “five-year-five-year-forward” inflation barometer derived from the futures markets. It has risen to more than 2.3 percent, the highest level since December 2018. That means: Investors see inflation in the five-year period from 2026 at around 2.3 percent. Most recently, the inflation rate in the USA was 1.4 percent.

That is exactly what weighs on the bonds. This is not only evident in the case of papers with a ten-year term. The yield on 30-year bonds approached the two percent mark for the first time since February last year.

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Only papers with a term of two years are relatively stable at less than 0.15 percent. This in turn means: the so-called yield curve – the yield gap between short-term and long-term bonds – is steeper than it has been in three years. This is also a sign of higher inflation expectations combined with a recovering economy.

The stock markets ignored the rise in yields for a long time, the Dow Jones Index, the S&P 500 and the index of the technology exchange Nasdaq reached record levels last week. “The stock markets have ticked Corona and are playing with the vaccinations against the virus that have been started on an economic recovery,” says Klude from MM Warburg.

However, there are signs that the good mood in the equity markets is crumbling as the flight from safe bonds unsettles investors in the equity markets. The US stock indices fell significantly at the beginning of the week on Monday, especially in the technology sector, and have not been able to match their recent record highs since then. The strategists at Commerzbank justify this with the “fear of the sell-off of US government bonds”.

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Several US central bankers have intensified these fears. Raphael Bostic, a voting member of the US Federal Reserve (Fed), said that he can imagine the US Federal Reserve scaling back its bond purchases later this year. Fed members Robert Kaplan, Patrick Harker and Chales stressed that the Fed should discuss when to reduce bond purchases. Investors are therefore excited about a speech that US Federal Reserve Chairman Jerome Powell will give in a webinar at Princeton University this Thursday.

The Fed has expanded its bond purchases massively over the past year, buying US Treasuries for $ 80 billion and mortgage-backed structured bonds for $ 40 billion every month. In doing so, it supports the market considerably. Without the Fed purchases, US Treasury bond yields would be much higher.

Threat to equities and emerging markets

A sharp rise in inflation and bond yields is a horror for many markets. Examples from the past show this. The most recent share crash due to fears of rising interest rates occurred in early February 2018.

At that time, the Dow Jones index lost 4.6 percent within a day. Previously, ten-year US Treasury yields had risen by more than half a percentage point to a four-year high of almost three percent in just a few weeks. At that time, too, the trigger was higher inflation expectations. They raised fears among investors that the US Federal Reserve would raise interest rates even further.

After all, investors do not yet need to have fears of interest rate hikes. At the end of August, the Fed announced a change in strategy and stated that inflation could remain above its previously favored level of two percent for a longer period of time before raising interest rates.

Burden on business

Since then, however, with the hope of an economic recovery after the Corona slump, inflation expectations in the markets have risen more strongly. Correspondingly, the yield on ten-year US Treasuries has more than doubled since its record low of just half a percent in August last year.

However, not only higher central bank interest rates, but also government bond yields mean that companies have to pay more for their debts. After all, corporate bond yields move more or less in line with government bond yields. However, higher refinancing costs eat into the company’s profits and therefore also put a strain on the shares.

Higher yields on US government bonds also often lead to a strengthening of the dollar because more money then flows into the US. This, in turn, is putting a strain on the emerging markets, which are at least partly in debt in dollars. With a higher dollar, the foreign debt of emerging countries increases. In addition, investors often shift their money from the riskier emerging markets when they get more attractive returns on US Treasuries.

Mohammed El Erian sees a “challenge” for investors

Investors should not ignore these risks, especially since the US stock markets are already valued very highly. A key reason investors tolerate the higher valuations is that, despite the recent surge, bond yields are still low.

According to the financial information service Bloomberg, analysts expect an average ten-year US return of 1.25 percent by the end of the year. This means that bond prices are likely to fall a little further. Institutional investors cannot do without bonds in their large portfolios, but they can expect further price losses.

In addition, there is no alternative to stocks in the environment of low yields. Investors who still want a chance for returns cannot avoid stocks. In addition, investors are betting that life will normalize again this year and that the economy will recover. The massive aid programs of the states and central banks, which exist not only in the USA, but worldwide, help.

In the opinion of Mohammed El Erian, Allianz’s chief economic advisor and ex-head of the world’s largest bond investor Pimco, these are understandable reasons for the expectation of further increases in the stock markets.

But investors shouldn’t be too careless and watch the bond market closely. If the trend towards rising yields and a steeper yield curve continues, this will be “a challenge” for monetary policy as well as for investors, according to El Erian.

More: The stock exchange ignores the corona pandemic and the lockdown, prices rise and rise. A look at the key figures reveals the first alarm signals.

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Dow Jones, Nasdaq, S&P 500: Tesla shares at record high

The New York Stock Exchange on Wall Street

The New York Stock Exchange is located on the famous street.

(Photo: dpa)

Frankfurt/New York Some investors return to Wall Street on Tuesday in the hope of a breath of fresh air for the US economy. The Dow Jones Index of Standard Values ​​gained 0.2 percent to 31,068 points. The technology-heavy Nasdaq advanced 0.3 percent to 13,072 points and the broad S&P 500 closed barely changed at 3801 points.

At the beginning of the week, the leading indices had lost up to 1.3 percent on Monday. The main reason for this was speculation that impeachment proceedings against the outgoing US President Donald Trump could hinder the adoption of new economic aid to cushion the consequences of the coronavirus.

“Even if the aid package were to be delayed, it would only be a matter of days or weeks, not months,” said portfolio manager Keith Buchanan of wealth manager Globalt. In addition, the upcoming financial season is moving more and more into the focus of investors.

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Dax stabilizes and closes unchanged

Düsseldorf The German stock market calmed down again on Tuesday, but did not really move: The Dax closed 0.1 percent in the evening at 13,925 points. Attempts to break the 14,000 mark failed. The day’s high was 13,999 points.

The good news of yesterday’s trading day was: The price slide to 13,807 points was over quickly, there was a high level of buying interest at this level. On the upside, the current record high from last Friday is now in focus. That is 14,132 meters.

Investors are currently positioning themselves for the new stock market year. And a look at the performance of the Dax and MDax shares over the past five days shows a clear direction.

The cyclical stocks are particularly popular. In the MDax, for example, the share of the fertilizer manufacturer K + S has risen by more than 15 percent in the past five days, followed by Siemens Energy (plus ten percent), Thyssen-Krupp (plus 9.1 percent) and Commerzbank (plus 6.7 Percent).

The software company Teamviewer leads the list of losers in the MDax with a minus of 7.8 percent. The stock was one of the big winners from the corona pandemic.

Real estate values ​​fell significantly in both the MDax and Dax. The DAX members Vonovia and Deutsche Wohnen gave in more than three percent and, together with BMW, made the flop 3 list of the past five trading days.

The clear winner in the Dax is Deutsche Bank with an increase of more than eight percent, followed by Heidelberg Cement and RWE, both of which gained around 6.4 percent.

Today’s trading day also showed this tendency: Behind Infineon, with an increase of almost three percent, were the cyclical stocks Covestro, Heidelberg Cement and Deutsche Bank with an increase in value of between 2.4 and 1.5 percent. The real estate stocks Vonovia and Deutsche Wohnen fell significantly.

This means that the industry rotation will continue in the new year. This paradigm shift began back in August of last year when the first news about a corona vaccine was published. This trend intensified in early November when Biontech and Pfizer announced the clinical success of their vaccine.

Stocks with high dividend yields

The stocks with high dividend yields such as Bayer and BASF or Deutsche Telekom, which each have a value of around four percent, have so far not clearly benefited from this rotation. In the MDax this would be Telefónica, Hochtief and Metro with a dividend yield of more than seven percent.

These stocks are likely to be on the index winners list at the latest if prices on the stock market slide significantly. The prerequisite for this: the payment of the targeted dividend is still considered likely. Then these papers with such high dividend values ​​would be “solid as a rock” in a negative interest rate environment.

Investors are euphoric

According to investor sentiment, there is a risk of a severe sell-off for the first time in a long time. The mood of investors is extremely euphoric according to the Handelsblatt survey Dax Sentiment. “Depending on your position and strategy, it is never wrong to realize some partial profits,” says sentiment expert Stephan Heibel after evaluating the current survey.

However, investors should not be betting everything on the fact that prices will soon slide significantly. Because such a euphoric mood can last a long time. Even if the current investors fail to drive the price because they are investing on a large scale, there is always the possibility that new investors will force their way into the market due to the new record highs.

Look at further individual values

Volkswagen: A media report about a possible recall of all delivered models of the Golf VIII hit the stock. The shares lost more than two percent at the top and were thus at least two of the biggest losers in the Dax. The papers were able to catch up again towards evening and closed 0.5 percent in the plus.

The latest version of the bestseller has to struggle with problems in the software control for the infotainment system and therefore has to go to the workshops, reports the “Frankfurter Allgemeine Zeitung”.

German postal service: The Corona year 2020 brought record results to Deutsche Post DHL. According to preliminary figures, the group’s earnings before interest and taxes (Ebit) rose to 4.8 billion euros and thus significantly exceeded the profit forecast, the Dax group announced on Tuesday in Bonn. At the same time, the company increased its earnings forecasts for the next few years.

Swiss Post profited strongly from the increase in global e-commerce activities and increased group sales by 5 percent to 66.8 billion euros during the pandemic. The company reported that the increase in shipment volumes in the express and national and international parcel business accelerated once again in the Christmas business.

The preliminary figures let the Post share close more than two percent firmer at 41.85 euros on Tuesday.

US yields continue to climb

Yields on the US government bond market continue to rise unchecked. Last week, this value exceeded the one percent mark for the first time since March 2020 and rose 1.1735 percent on Tuesday.

The yields on US Treasuries have a guiding role for the financial market as a whole. Further rising yields would speak in favor of a stronger dollar and against further rising share prices, bonds would then be an alternative.

The question is: When does the US Federal Reserve intervene verbally and stop this upward trend? So far nothing has been seen of it. On the contrary: “Interest rates could rise earlier than forecast, as the economy is recovering faster than expected from the consequences of the Covid-19 damage,” said Atlanta Fed President Raphael Bostic on Monday.

He can well imagine that bond purchases will be scaled back this year. Should other members of the US Federal Reserve express themselves in a similarly optimistic manner, this should give US yields and thus also the US dollar a further boost.

Accordingly, the euro was unchanged against the greenback on today’s trading day and was trading at $ 1.2161. The price of gold fell 0.07 percent to $ 1,841 per troy ounce (31.1 grams).

Before the US yield on ten-year government bonds rose to over one percent, a troy ounce cost more than $ 1,900. Because gold does not yield any interest, with the rise in yields, US government bonds are moving more into the focus of investors again.

However, taking the inflation rate into account, real interest rates are still negative in the USA as well. This continues to speak in favor of gold, as does the expected sharp rise in US national debt as a result of new trillion-dollar economic stimulus packages from the new US government.

According to the commodity analysts at Commerzbank, the recent drop in gold prices was not accompanied by any significant ETF outflows. This is therefore likely to have been mainly speculative. Before the crash, speculative investors had expanded their net long positions to their highest level in five months. Many were caught on the wrong foot with it.

Investors are pulling out of the country’s bonds because of the impending rupture of the Italian government. This drives ten-year stocks to a six-week high of 0.629 percent. “Should ex-Prime Minister Matteo Renzi live up to his threat and withdraw ministers from the government, this could lead to price losses not only in Italy, but in the entire euro zone,” warns portfolio manager Thomas Altmann from the investment advisor QC Partners.

What the Dax chart technology says

What’s the next goal on the top? For the technical analysts at Bank HSBC, the 14,228 point mark is the next point of contact. From a technical chart point of view, a target price of 14,700 meters can be derived in the coming days and weeks.

The calculation behind it: For almost six months, the German benchmark index moved in a sideways range between around 13,500 points (exactly 13,460 points) on the top and 12,300 points on the bottom. Only at the end of October, shortly before the US presidential election, this phase was interrupted for a few trading days when the Dax slipped to 11,450 points. In retrospect, that was the signal for the strong continuation of the rally that followed.

Based on the range of the month-long sideways movement within 1200 points (13,500 minus 12,300), according to technical analysis, the coming trading range can also be estimated. That should have a similar breadth, so the Dax – roughly estimated – fluctuates between 13,500 points on the bottom and 14,700 points on the top.

The brand also provides further guidance: medium-term investors can raise their stop-loss level to 13,500 points.

Here you go to the page with the Dax course, here you can find the current tops & flops in the Dax.

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