Reasons for the Rapid Market Recovery
1. Hope for Interest Rate Cuts and Monetary Easing:
The prospect of possible interest rate cuts, particularly in the USA, has significantly improved investor sentiment. This is supported by expectations of tax cuts and an overall supportive monetary policy.
2. Positive Developments in the Commodity Market, Especially Copper:
The commodity market appears robust, with copper being closely monitored as a key indicator of economic activity. Positive impulses in this area strengthen investors’ confidence in an economic recovery.
3. Easing of Trade Conflicts:
A swift agreement between the USA and China to temporarily suspend tariffs has reduced fears of escalating trade wars. Other countries also benefit from similar tariff pauses, which decreases the risk of negative news.
4. Technological Innovations as Growth Drivers:
In particular, AI-driven innovations are seen as a crucial factor for future growth and contribute to positive market sentiment.
Market Development Overview
- The US stock market currently trades with only a moderate discount of about 3% to fair value, after being under greater pressure previously (up to 17% discount). This rapid recovery has led investors to adjust their positioning from overweight to market-weighted allocations.
- The German index DAX continued its recent recovery and closed higher despite ongoing geopolitical risks such as the Middle East conflict.
- Volatility remains due to sporadic data releases and geopolitical uncertainties; however, overall sentiment in the markets is currently optimistic.
Conclusion
The initial escalation due to geopolitical tensions has been overcome by a combination of hopeful monetary policy signals (expectations of interest rate cuts), positive impulses in the commodity sector (copper), and de-escalation in trade disputes. This has led to a rapid euphoria in the financial markets with rising prices in both the USA and Europe.