Invest when fear reigns
Fears of recession, inflation, supply chain problems and profit warnings have scared many investors away for weeks. But those who keep a cool head, especially in turbulent times, will earn significantly more in the long run
“Greed is good,” Gordon Gekko said in the stock market classic “Wall Street.” Soberly, greed is a good signal: If everyone is talking about stocks, ie value and price are no longer in a healthy relationship, the warning lights should be on. But the opposite is at least as important: stock market panic. As soon as stocks are thrown out of the depots for no reason or reason, fear dominates and shaking hands sell, the bottom is usually in sight. This recurring pattern of behavior was also observed when the dot-com bubble burst, following the Lehman crash, the euro crisis and most recently the Corona crash.
But not only in the market as a whole, it is also worth paying attention to exaggerations in individual stocks. The recent reporting season provided good examples of this: Netflix, Alphabet, Upstart, Walmart and many other stocks fell by a significant double-digit percentage after the publication of their balance sheet. The interesting thing here is that companies with negative earnings surprises were severely punished. If the results did not live up to expectations, the price fell by almost six percent on average. To put this in context: The market reacted even more negatively to disappointments in 2011. And even good company reports were recognized by investors with a weaker performance than they had for eleven years.
Attractive stock returns with good timing
For Jürgen Molnar, capital market expert at Robomarkets, the downward exaggerations in particular provide good opportunities for building a strong portfolio in the long term. “Although there is no alternative to stocks, the timing factor is often underestimated. Anyone who joined Dax in the summer of 2007 has so far achieved a meager return of less than four percent a year. Strong nervous investors, who bought at the height of the financial crisis in March 2009, earned more than ten percent a year. So courage is rewarded in the stock market, ”says Molnar.
There is no doubt that the gut feeling is bad at the moment. But here, too, it helps to analyze the situation soberly. If the mood is good and the majority expects prices to rise, a lot of capital has already been invested. It often weighs on the prices. On the other hand, if the mood is bad and investors are sitting with a lot of cash, you should lie and wait. “Most of the time, the first good news is enough to trigger a strong rally,” said Norbert Betz, head of trade monitoring at the Munich Stock Exchange / Gettex. “Anyone who does not get in fast enough will fall behind in performance and have to buy at ever higher prices,” Betz explains the dynamics. But one thing must be clear to any investor: hitting the absolute low, the turning point, is like winning the lottery.
Investors are currently sticking to proven titles. An evaluation from the Munich / Gettex stock exchange shows that investors are still dependent on heavyweights such as Allianz, Mercedes and BASF. In the US, despite volatility, Tesla was one of the most popular stocks, followed by Amazon.
European equities are now attractively valued
We may not have reached the lower extremity yet, but much of the road lies behind us. From a fundamental point of view, German and European equities are rated cheaper than the historical average with a price / earnings ratio of 11.5 and 12.5. This is not yet the case for US equities, for technology equities investors currently have to dig a little deeper into their pockets than the long-term average. But here too there are already many quality values at discount prices.
Gil Shapira, from broker Etoro, believes that two factors must now be taken into account: “Analysts have recently reduced profit expectations for companies. The bar is therefore quite low, and even with mixed results, companies can quickly come up with a positive surprise. ” The most important factor, however, remains international monetary policy. As soon as the US Federal Reserve realizes that the economy cannot cope with further rate hikes and currency watchdogs take on a milder tone, a steady trend reversal is likely to follow with rising stock prices. Those who are already invested before others become greedy again are among the winners.