Stock markets are sailing at record levels
The market is in an extraordinary mood right now. While question marks hang over the global economy and geopolitics, the major US indices have hit new ATH (All-Time High) readings. However, there is a simmering issue beneath the surface: the markets have been set on extreme optimism over the past few weeks, leaving very little room for error.
US strong, DAX lags behind
Although the markets have seen significant upwards movement, the rise has not been uniform. While the S&P 500 and NASDAQ have reached new all-time highs, Europe's driving force, the German DAX index, has been somewhat left behind in this rally. Although the DAX has risen from its lows in late March, it has not reached new ATH records. The US rise is driven in particular by technology and artificial intelligence, while the DAX is a more traditional industrial index that suffers from high energy prices and slower economic growth. It is worth noting that the US indices have risen significantly from their March lows in record time (S&P500 around +13%, NASDAQ around +17%), which is technically one of the strongest momentum moves this year. Although the DAX index has also risen by more than 10%, there is still about 5% left to reach the ATH level.
Related Products
S&P 500, 1 year chart
S&P 500, 5 year chart
Related Products
NASDAQ, 1 year chart
NASDAQ, 5 year chart
Related Products
DAX, 1 year chart
DAX, 5 year chart
MAG7 and the return to the top
Much of the recent market growh has been driven by the MAG7 (Magnificent Seven) companies. Amazon, Alphabet and Nvidia, for example, are once again trading near their all-time highs. Other companies in the group have also risen significantly in recent weeks. The market is currently pricing in a scenario where these giants are expected to deliver nearly flawless results. This exposes the market to risks:
● Cautious outlook: If companies' growth forecasts for the rest of the year are cautious, the reaction could be drastic.
● "Sell the news": If the results only meeth expectations, investors may quickly sell theirholdings.
● AI skepticism: Even the slightest doubt about the profitability of AI investments could drag down the entire market, given the significant weight of these companies
Related Products
NVIDIA, 1 year chart
NVIDIA, 5 year chart
Related Products
AMAZON, 1 year chart
AMAZON, 5 year chart
Related Products
GOOG, 1 year chart
GOOG, 5 year chart
Summary
The market is in a situation where the technical outlook has clearly improved, but the fundamentals are now facing a baptism of fire. The geopolitical situation should not be overlooked either, as it introduces unpredictable risks to the whole. The coming weeks will reveal whether the upward movement is real or whether an "optimism bubble" has built up in the market that could burst withjust a little negative news.
Indicators shown on the graphs:
● SMA200: 200-day moving average, red.
● SMA50: 50-day moving average, blue.
● EMA25: 25-day exponential moving average, yellow.
Risks
Credit risk of the issuer:
Investors in the products are exposed to the risk that the Issuer or the Guarantor may not be able to meet its obligations under the products. A total loss of the invested capital is possible. The products are not subject to any deposit protection.
Currency risk:
If the product currency differs from the currency of the underlying asset, the value of a product will also depend on the exchange rate between the respective currencies. As a result, the value of a product can fluctuate significantly.
Market risk:
The value of the products can fall significantly below the purchase price due to changes in market factors, especially if the value of the underlying asset falls. The products are not capital-protected
Product costs:
Product and possible financing costs reduce the value of the products.
Risk with leverage products:
Due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.
External author:
This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. This information is sponsored by Bank Vontobel Europe AG, which may be a counterparty to transactions involving the financial instruments discussed in this information. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.
The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.
Disclaimer:
This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.
© Bank Vontobel Europe AG and/or its affiliates. All rights reserved.