Weekly outlook: “US Federal Reserve from “enemy to friend”

The interest rate hopes confirmed by US Federal Reserve Chairman Powell in Jackson Hole are supporting the stock markets. The most recent all-time highs have almost been reached again. Another reason: good corporate profits.
 

26 August 2024. FRANKFURT (Börse Frankfurt).  The US Federal Reserve's interest rate cut in September now appears to be a foregone conclusion, which is pleasing the stock markets. The time for falling key interest rates has come, US Federal Reserve Chairman Jerome Powell said in a highly publicized speech at the central bank meeting in Jackson Hole on Friday. “The stock markets are clearly betting on monetary policy. The Fed will turn from enemy to friend of the stock markets in the foreseeable future,” commented Robert Halver from Baader Bank.

The temporary irritation caused by the re-opening of the US presidential election is also subsiding. “Both sides, the red and the blue, will certainly boost the economy with even more government debt,” says Halver. Above all, extensive infrastructure investments are to be expected. Encouraging fundamental signals are also coming from the corporate side. “Their positive outlook was confirmed in the reporting season. Profit expectations worldwide are at least robust.”

The US stock markets closed Friday with gains. The S&P 500 and Dow Jones are not far from the all-time highs reached in mid-July. The DAX stood at 18,633 points on Monday morning, having closed at 18,633 on Friday.

“Vulnerability remains”

According to Martin Zurek from Weber Bank, however, the markets remain vulnerable. “Geopolitical risks such as the tensions between the USA and China, the war in Ukraine and instability in the Middle East could continue to exert pressure on the financial markets,” says the portfolio manager. In addition, the interest rate policy of the US Federal Reserve remains a decisive factor of uncertainty. The bank continues to expect two interest rate cuts by the US Federal Reserve by the end of the year. “We are therefore somewhat more skeptical about the interest rate fantasy than the majority of market participants.”

Despite a seasonally weak September: earnings support

“The DAX has recovered surprisingly quickly from its bout of weakness at the beginning of August, as earnings expectations for DAX companies continue to develop robustly,” explains Andreas Hürkamp from Commerzbank. The bank expects a nervous stock market trend with increased price fluctuations in September, which is often weaker due to seasonal factors. “However, as long as DAX earnings expectations remain stable near their all-time high, the DAX should recover quickly after setbacks.”

Chart technology speaks for the DAX

The technical picture is positive after the recent price gains, as Ralf Umlauf from Helaba explains: Stochastic, MACD and DMI are all pointing to buy. “However, there are also oversold signals, which is why the DAX is likely to find it difficult to head for a new impulse high.” Hurdles can be found at the most recent high and at 18,779 points, with support at 18,332 and around 18,250.

Important economic and business events of the week

Monday, August 26

10.00 am. Germany: ifo Business Climate August.

14.30. USA: New orders for durable goods July. As aircraft manufacturer Boeing reported another increase in orders in July, Helaba expects clearly positive indicators.

Thursday, August 29

11.00 am. Eurozone: Economic Sentiment August. According to DekaBank, economic confidence in the eurozone remains below average.

2.00 pm. Germany: Consumer prices August. After falling from its peak of 8.8 percent at the end of 2022, inflation fell to 2.3 percent in July, according to Helaba. It expects a further decline in August, mainly due to lower energy prices.

Friday, August 30

9.55 am. Germany: Unemployment rate August. According to Helaba, employment in Germany has risen until recently, but growth has declined in recent quarters. At the same time, jobs are mainly being created in predominantly public sectors such as healthcare.

11.00 am. Eurozone: Consumer prices August. Inflation in the eurozone is likely to have eased relatively significantly to 2.2 percent, says DekaBank. For the core inflation rate, the bank expects only a slight downward trend to 2.8 percent.

2.30 pm. USA: Private consumption deflator July. Analysts expect the inflation measure closely watched by the US Federal Reserve to have risen from 2.5 percent to 2.6 percent, the core rate from 2.6 percent to 2.7 percent, as reported by Deutsche Bank. If the price increase is stronger than expected, the extent of interest rate cuts priced into the market will probably decrease again. 

From Anna-Maria Borse, 26 August 2024, © Deutsche Börse AG