Weekly outlook: “Turning point reached?”

Reversal day as a glimmer of hope

The significant rise in share prices afterwards was remarkable for several reasons. According to calculations by LBBW, the Nasdaq 100 has only risen more strongly twice in its history than on Wednesday “after Trump's role backwards”. The editors of “Wellenreiter Invest” also point to the “extreme upward volume of 98.6 percent” on the US market that day. This means that almost 99% of the traded volume was accounted for by shares whose prices rose. Such upward days are unusually rare and are seen by experts as a “plus point for stock market behavior” in view of history.

As the seasonality also points to a continuation of the upward trend, the stock market writers “continue to assume that an important low was set on Wednesday”. Our colleagues at “Index-Radar” also point out that such reversal days “often mark important turning points”. In combination with the slight rise in the daily lows of the US indices throughout the week, this is an “important signal for a possible bottom formation”. However, the 200-day moving average, which was undercut in March, still stands in the way of a sustained upswing as the “next technical hurdle”.

Focus on sentiment indicator

In the current environment, DWS analysts are looking at sentiment on the equity markets. According to the analysts' calculations, the “panic euphoria indicator”, which represents the quotient of valuation and volatility, has now reached “deep panic territory” for the S&P 500, having been in euphoria territory as recently as February. In recent years, similarly low levels of the indicator have led to an upward move ment on the markets in four out of five cases. However, the year 2022 teaches us that we should not blindly rely on a recovery: “Our indicator made its first foray into panic territory in March of the year, but the market only bottomed out after a further 15 percent decline”.

Analysts expect a year-end rally

The strategists at DZ Bank are hopeful, at least in the medium term. Uncertainty is likely to continue to dominate events into the summer and ensure a volatile sideways movement around current levels. Later in the second half of the year, market participants should once again see room for other influencing factors such as the tax cuts in the US scheduled for early 2026 and the “first delicate effects” of government spending programs for defence and infrastructure in Europe. “These should prepare the ground for a year-end rally and sustainably better times on the equity markets in Europe and the US”.

Specifically, DZ Bank expects the DAX and the Euro Stoxx 50 to reach 23,000 and 5,400 points respectively by the end of 2025. By mid-2026, there is even upside potential to new record highs in the region of 25,000 and 5,900 points respectively. The analysts are also very confident about the S&P 500, with a year-end target of 5,700 points and a rise to 6,300 points in the first half of 2026.

US bonds and the US dollar under pressure

In addition to equities, investors should currently keep a close eye on developments on the bond and currency markets. Following a wave of selling in the previous week, the yield on ten-year US government bonds has risen significantly to 4.50 percent, while the US dollar index has fallen unusually sharply. “Investors are fleeing the dollar and US government bonds because confidence in the US is being lost,” is the unanimous opinion on the market. “Trump's volatility is pure poison for the economy,” explain LBBW strategists, for example, referring to the resulting lack of planning certainty for companies and investors. Even a possible downgrade of the USA's triple A rating is already being discussed by analysts.

The future is more uncertain than ever

Meanwhile, the US reporting season for the first quarter of the current year, which has just begun, continues to gather pace this week. Looking to the future is particularly exciting, although LBBW believes that forecasts here are limited at best given Trump's volatility. “After all, the uncertainty about what the coming month, next week or even tomorrow will bring seems too high at the moment.”

Important economic and business events of the week

Monday, April 14

No significant economic data relevant to the stock market

Tuesday, April 15,

11.00 a.m. Germany: ZEW Index. After the German fiscal packages catapulted economic expectations upwards in March, Deka fears a slump in the following month. The stock market turbulence alone is already weighing on the mood of financial market analysts. Even if the economy is not threatened by an equivalent slump, the third year of recession in Germany is probably a foregone conclusion in the opinion of the strategists.

Wednesday, April 16,

4 a.m. China: GDP. Economists at Deka expect the gross domestic product of the Chinese economy, which got off to a decent start to the year, to have increased by 5.2% year-on-year in the first quarter. However, the massive tariff increases in the USA, to which almost 15% of Chinese exports went in 2024, are likely to weigh heavily on Chinese industry from April onwards.

2:30 p.m. USA: Retail sales. The US economists at Deutsche Bank expect retail sales to have risen by 2.0 percent in March, more than in February (+0.2 percent). The consensus forecast is for an increase of only 1.4 percent.

Thursday, April 17,

2.15 p.m. Eurozone: ECB interest rate decision. According to Deutsche Bank, the upcoming central bank decisions will shed light on how policy makers assess the impact and risks of recent events on their economies. Following the tariff announcements by the USA and the resulting increase in economic downside risks, our colleagues at Deka expect another interest rate cut.

Friday, April 18,

Good Friday - stock exchanges closed