Will the stock market rally continue or is a major correction imminent? That's the question on everyone's minds, as both the German DAX and the US S&P 500 have seen significant gains in 2023. Let's explore the views of four financial market experts to shed some light on this dilemma.
First up is Reinhard Pfingsten, Chief Investment Officer at Deutsche Apotheker- und Ärztebank. He views the strong price increases as a counter-reaction to the poor stock market year in 2022. While a temporary correction in the short term can't be ruled out, Pfingsten remains optimistic about the ongoing positive trend.
Marco Herrmann, Managing Director at FIDUKA Depotverwaltung, agrees with Pfingsten. Occasional periods of consolidation are typical for stock markets, and a phase of higher inflation rates might lead to such a period. However, Herrmann believes these developments won't undermine the medium-term upward trend.
Then we have Michael Wittek, Head of Portfolio Management at Albrecht, Kitta & Co. According to Wittek, the current market rally is fueled by the "wall of worry," meaning that investors are investing despite potential negative factors. Corrections happen on the stock market, but they're completely normal.
Oliver Zastrow, Managing Director at the Qcoon Group, is also anticipating volatility. He sees potential for a correction, especially given that prices are highly overbought in some sectors. Yet, the positive momentum remains, and the risks for a significant drop off are still low.
Investors are largely optimistic that central banks, such as the US Fed and the ECB, will not raise interest rates further but instead start cutting rates. While this is a widely held belief, some experts believe an optimistic forecast of up to five interest rate cuts is a little too optimistic.
One potential catalyst for a price increase in oil could be a return to stronger global growth or an escalation of conflicts in the Middle East. However, the current trends suggest an oil price of around 80 dollars per barrel, which is considered reasonable, while a significant price hike is unlikely due to structural changes towards renewable energies and nuclear power.
The experts also offered their insights on the potential risks of a recession in the USA and Europe. While some forecast a soft landing, others are more cautious, warning of structural problems that need to be addressed in Europe. Ultimately, only time will tell what the future holds for the stock market.
In conclusion, while some experts urge caution due to overbought levels and potential volatility, the overall sentiment among financial market experts remains positive. They are bullish on the US and UK government bonds, and they recommend focusing on a mix of the Mag 7 (Alphabet, Amazon, Apple, Microsoft, Nvidia, Meta Platforms, and Tesla) and dividend stocks with a focus on Europe and the USA. Overall, the experts believe that the market will continue to rise, albeit with potential corrections, in the coming year.
