Weekly outlook: "Companies need to justify valuations"
The reporting season and the US election will determine the markets. Major losses on the markets are not expected, but greater fluctuations.
28 October, 2024 FRANKFURT (Frankfurt Stock Exchange). Just over a week to go until the US election - but while the uncertainty on the bond markets is reflected in higher yields, the mood on the stock market remains positive. Although the DAX, S&P 500 and Dow Jones have not been able to continue their record run of late, they are not far below their all-time highs. On Monday morning, the DAX stood at 19,492 points after closing at 19,464 on Friday and reaching an all-time high of 19,674.70.
The reporting season reaches a peak this week. In the USA, more than a third of the S&P 500 companies publish their figures, including Alphabet, Microsoft, Meta, Amazon and Apple. In Europe, 75 companies from the Stoxx 600 report, including BP, Banco Santander, Novartis, UBS, BASF, Volkswagen, Shell and STMicroelectronics, according to Deutsche Bank.
Higher fluctuations ahead
Hannah Thielcke from Weber Bank points to the recent downward revision of earnings estimates. “The earnings growth estimate for US companies in the S&P 500 is now only 4 percent,” she explains. A slight fall in profits of 2 percent is even expected for Europe. The crisis-ridden automotive sector and energy companies are a particular burden here. For the stock markets, she expects somewhat greater fluctuations in the coming weeks. “On the one hand, companies will have to justify their continued high valuations with corresponding results, and on the other, the US election campaign is now entering its decisive phase.”
US election: consequences for stock markets unclear
Markus Reinwand from Helaba has looked at the impact of US elections on the stock market: Since 1944, the S&P 500 has gained 5.5 percent a year under Republican presidents and 10.6 percent under Democratic presidents, he notes. The difference between Trump (11.6 percent) and Biden (14.7 percent) is less marked.
“With Trump, 'America First' was clearly visible on the stock market: the S&P 500 performed significantly better than the stock market barometers of the most important trading partners,” explains Reinwand. Trump's tariff threats therefore did not bode well. On the other hand, the Democrats have not stood out as advocates of free trade in recent years either. “One thing seems clear, regardless of the outcome of the election: the international distribution conflicts will not diminish in the foreseeable future.”
“Decline just a correction in an upward trend”
The technical picture speaks for the stock markets - at least Christoph Geyer is convinced of this: “There is no need to panic, the rally will continue,” he explains with a view to the past week, which was “nothing to write home about” for the market. “If you look at the corresponding trading activity, it is easy to see that the decline is merely a corrective movement in the current upward trend.” In addition, market participants only took a few profits. Such counter-movements are good for the trend. The corrective movement could well continue this week, but a dramatic slump would only occur in the event of new market-moving events - which are hardly to be expected.
Important economic and business events of the week
Wednesday, 30 October
10.00 am. Germany: GDP third quarter. DekaBank expects the second decline in a row and thus formally a technical recession. With the current data, the phase of average zero growth will be extended to ten quarters.
11.00 am. Eurozone: GDP third quarter. Gross domestic product in the eurozone is also likely to have increased in the third quarter, according to DekaBank. However, the trend remains subdued. Among the four large EMU countries, there is a lack of support from Germany.
1.30 pm. USA: GDP third quarter. Commerzbank forecasts strong growth of 0.6% for the USA, meaning that the US economy is likely to remain a growth engine for the global economy.
14.00. Germany: Consumer prices October. An increase of 0.2 percent on the previous month and 1.8 percent on the previous year is expected, slightly more than in September.
Thursday, 31 October
2.30. China: Purchasing Managers' Index October. According to DekaBank, the measures announced so far in China to stimulate the economy are unlikely to have had much effect. It therefore expects the official purchasing managers' index for the manufacturing sector to largely move sideways.
11.00 am. Eurozone: Consumer prices October. Inflation is likely to have risen slightly in October, says Commerzbank. After falling energy prices had depressed inflation in recent months, the upward factors are now prevailing again.
1.30 pm. USA: Septemberconsumer spending price index. For the first time since February 2021, the inflation target has been reached, comments DekaBank and expects the index, which is closely watched by the US Federal Reserve, to rise by 2 percent year-on-year.
Friday, 1st November
Public holiday (All Saints' Day) in some federal states and countries. Trading on Xetra and the Frankfurt Stock Exchange takes place.
1.30 pm. USA: Unemployment figures for October. Storms and strikes have depressed employment in the USA, explains Commerzbank, and job creation has therefore slowed significantly. This will normalize again in the following months.
From Anna-Maria Borse, 28 October 2024, © Deutsche Börse AG
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