The past long rally on the stock markets has cost strength.
It now seems a bit out of breath on the stock market after, for example, the Dax had climbed the round 16,000 mark for the first time last week.
Concern that the US Federal Reserve could soon tighten the reins of monetary policy has recently led to lighter rates.
The question arises once again: what else is going on on the stock exchange for investors in the second half of the year?
Measured by the combined earnings estimates of the analysts, the markets are currently expensive, but not too expensive, says Ivan Mlinaric of Quant Capital Management.
“The public often uses the estimates of profits for the current and the coming financial year, the forward earnings, as a basis for assessing the markets,” says Mlinaric.
Measured against these earnings estimates, there is currently an estimated price-earnings ratio (P / E) for the S&P 500 of a little more than 21, for the Dax of 14 and for the EuroStoxx of around 17. In historical comparison, these values are according to Mlinaric high, but not yet high.
Confidence in forecasts and estimates
Accordingly, many investment strategists would not consider the equity markets to be unduly expensive. “The question is how far one can trust the estimates,” says Mlinaric, referring to an in-house analysis in which the profit estimates over the past 20 years were checked. This shows that analysts often overestimated or underestimated corporate profits, depending on whether the market was in euphoria or panic.
According to this, analysts tended, on average, to overestimate profits. The mean deviation was in the range of 10 to 20 percent. Many market participants are currently particularly optimistic thanks to the extensive fiscal policy tailwind. "Based on historical experience, it can be assumed that the consensus clearly overestimates corporate profits for the current and the coming year," warns Mlinaric. "With an assumed estimation error of 20 percent, the current company valuations on both sides of the Atlantic would be in the range of their historical highs."
Accordingly, another question arises at this point for investors, namely whether the stock markets are not too expensive after all. The answer doesn't seem easy. On the one hand, the "political framework conditions such as the comprehensive fiscal policy measures, the ultra-loose monetary policy and the historically low interest rates are historically unique" - and the whole thing is paired with the demand due to the lack of alternatives for shares in view of zero interest rates. On the other hand, investors who are only now deciding to jump on the stock market should be aware that the shares they have bought may be significantly more expensive than assumed, according to Mlinaric.
In the opinion of Tilmann Galler, capital market strategist at JP Morgan Asset Management, convertible bonds are an interesting investment opportunity for investors to “avoid” economic obstacles in the near future. These are corporate bonds, which in turn give the holders the option of exchanging the bonds for shares in the company during the term.
The advantage of such an investment is that it is less volatile than a pure equity investment. "For an assessment of the attractiveness, three factors play a decisive role: the creditworthiness of the company, the value development and the volatility of the share," explains the capital market expert. In his view, equity market volatility should increase in the second half of the year. "This is good news for the value of the optionality in convertible bonds, because the higher the volatility, the higher the potential return of the option and the higher the price," explains Galler.