2023-06-13 09:14:44
EFor a while, the economic data could not please the stock markets. If they did well, the markets got scared because strong growth could encourage higher inflation and thus also necessitate higher key interest rates. And the stock markets feared little more than higher interest rates, because they could stall the economy. They also make bonds look better as a competitor to stocks. On the other hand, if the economic data were bad, the markets didn’t like it either, because a weaker economy simply dampens corporate sales and profits.
However, the tide has turned a few weeks ago, observes Sven Streibel, chief equity strategist at DZ Bank. “With the bank quake in March, there was a rethink,” says Streibel. “Fear of the Fed and the ECB on the stock markets has subsided considerably.” The strategist points to the high probability that further interest rate hikes could come, but that the stock markets are no longer thrown off course. The American Federal Reserve will announce its next interest rate decision on Wednesday, followed by the European Central Bank (ECB) on Thursday.
In America, the trend is towards an interest rate pause after the Fed had increased interest rates ten times within 15 months to a good 5 percent. However, the decision is considered close, especially since the American May inflation figures, which could have an important influence on the Fed’s decision, will only be presented this Tuesday. A decline to a good 4 percent is expected. A year ago, the rate peaked at 9.1 percent. The Fed hiked rates earlier and more than the ECB and is a step further in the fight against inflation. Inflation in the euro zone was 6.1 percent in May. A further rate hike of 0.25 percentage points is therefore expected here. The deposits at the ECB would then bear interest at 3.5 percent after minus 0.5 percent a year ago.
Keeping an eye on the economy
In America in particular, monetary policy experts are discussing the impact of monetary policy on the economy after growth had slowed significantly in the first quarter. “The full focus of the stock markets is now also on the economy,” says equity strategist Streibel. “If the data on the labor market and incoming orders are good, that helps the stock markets, even if that could mean higher inflation and higher interest rates.” Why has the fear of higher interest rates suddenly disappeared? “The high inflation and therefore higher interest rates are seen as economic strength, as a sign that higher prices can also be paid and that money is poured into the coffers of companies,” says Streibel.
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