Background of the Recovery
The recent recovery of US stocks, particularly the major indices like the Dow Jones and S&P 500, is a significant signal for investors, as it indicates possible stability in the market. This development should be viewed in the context of the geopolitical tensions in the Middle East, exacerbated by the conflict between Israel and Iran.
Geopolitical Tensions
The conflict between Israel and Iran has historically led to substantial market shocks. The recent military confrontations have stressed the markets, primarily due to fears of an escalation of the conflict and potential involvement by the US.
Oil Price Development
Oil prices are a vital indicator of market development during such geopolitical crises. After a sharp increase at the onset of hostilities, prices have since declined, indicating some relaxation in the tensions.
G7 Summit
The upcoming G7 summit in Canada could provide a platform for concluding additional trade agreements, which could present positive momentum for the markets.
Current Market Situation
- Recovery of US Stocks: Despite ongoing geopolitical uncertainties, US stocks are showing signs of recovery. This suggests that investors are viewing the current situation as less critical than they did in previous days.
- Bond Market: The bond market is also signaling relaxation, as the yields on ten-year US Treasury bonds have increased by 2 basis points to 4.45%. This could indicate a degree of stability within the financial system.
- Future Risks: However, experts warn of a fragile recovery, as the risk posed by headlines remains high. An escalation of the conflict or direct US involvement could quickly change the sentiment.
Evaluation of the US Stock Market
- Valuation Level: The US stock market is currently trading at a discount of about 3% to fair value. This level is considered neutral, but given the high downward risks, a stronger margin of safety may be sensible.
- Market Weighting and Value Stocks: Overall market weighting is neutral, but there is an overweighting of value stocks. This could indicate a strategy focusing on stable, value-oriented investments.
Overall, the recovery of US stocks demonstrates a certain resilience of the markets to geopolitical shocks, but uncertainties remain high, and investors should continue to exercise caution.