November and December are seasonally good months for the stock markets; in the past 20 years, they have only been negative five times each. This year, this effect was particularly pronounced with a gain of nine per cent in November and around three per cent in December. With this knowledge, we had already toned down our fundamentally cautious stance somewhat.
Soft landing without collateral damage?
Almost everywhere that central banks have raised interest rates in the past two years, the market is now expecting the majority of these interest rate hikes to be reversed. The US Federal Reserve, which has already held out the prospect of three interest rate cuts for 2024, has played a significant role in this. The futures markets are expecting the first rate cut as early as next March. The successes in combating sharply rising consumer prices have paved the way for this, but further bottlenecks, for example in the labour market or the housing market, have not been eased. Whether the central banks will actually succeed in normalising price pressure and inflation expectations without any damage will only be known in the course of the first quarter on the basis of economic indicators. However, a soft landing is now fully priced in.
Critical phase expected
We remain sceptical and expect a critical phase in the first half of the year with price losses on risky investments such as equities and low-rated bonds in the wake of less positive economic figures. In the meantime, however, the price momentum and confidence in the market are unlikely to decline significantly without external influence. That is why we want to take this momentum with us by increasing our equity allocation to neutral and are swimming with the tide for the time being. If the hopes are confirmed, global small caps, for example, would benefit to an above-average extent.