Reasons for the Extraordinary Resilience
1. Familiarity with Shocks and Resilience through Experience
The markets have experienced numerous crises in recent years – from the pandemic to geopolitical tensions and trade conflicts. This accumulation of shocks has led investors to learn how to cope with uncertainty. The sheer number of crises already endured makes the markets more resilient to new negative news.
2. Solid Fundamentals in the USA
The US economy shows robust dynamics: GDP growth has been around 3% since the third quarter of 2023, while inflation has consistently declined (from 9% in 2022 to about 2.5% in early/mid-2024). This supports investor confidence in the stock markets. In addition, forecasts for the earnings growth of US companies in 2025 remain optimistic at around 15%.
3. Anticipated Interest Rate Cuts and Record Stock Buybacks
Interest rate cuts by the Federal Reserve are seen as likely, which brings additional liquidity into the market and encourages investors. At the same time, US companies are planning record stock buybacks – possibly over one trillion dollars a year – which tightens supply and supports prices.
4. High Valuations Despite Risks
US stocks are currently extremely highly valued, almost at the level of the dot-com bubble. Nevertheless, many investors remain invested or even enter the market as they anticipate further price gains or find alternatives like fixed deposits unattractive.
Other Supporting Factors
- Private Markets: Even outside the public market, private market investments offer potential for higher returns and greater resilience against fluctuations in the public market.
- European Markets: European stocks also started the year strong and temporarily outperformed their US counterparts, offering diversification benefits.
- Improved Sentiment due to Decreasing Recession Fears: Fears of a global recession have eased, contributing to positive sentiment.
Conclusion
Despite numerous risks – such as geopolitical tensions, trade conflicts, or high valuations – stock markets remain surprisingly stable. Reasons for this include:
- Familiarity with Crises
- Solid Fundamentals (especially in the USA)
- Anticipated Interest Rate Cuts
- Record Stock Buybacks
For investors, this means that the selection of individual securities is becoming increasingly important; broad index investments alone are no longer sufficient for sustainable success.