It's been a frustrating half year on the financial markets.

Even the gloomiest forecasts at the beginning of the year have been undercut: the German share index Dax has lost 20 percent.

The leading American market barometers show the worst half-year results for decades.

The Dow Jones index is down 15 percent and the broad S&P 500 index is down a good 20 percent.

The world stock index MSCI, which recorded a minus of 21 percent, is similarly bad.

For the index, which many German investors follow via passive index funds (Exchange Traded Funds; ETF), it is the blackest first half of the year in its history.

Markus Fruehauf

Editor in Business.

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The balance sheet does not light up the fact that panic sales have not materialized so far, despite the Ukraine war and unleashed inflation.

Rather, the price losses are taking place in an orderly manner.

Investors are gradually withdrawing, very steadily, but not hectically.

After their withdrawal, more and more of them remain in shock in the face of the impending disaster, such as a failure of Russian gas supplies and the associated restrictions on European industrial production.

It's hard to hope for a turnaround at this point.

The markets are under the spell of inflation and recession worries.

But the two don't work together: an economic downturn slows down price increases because demand is falling.

In addition, the central banks will then have to dose their rate hikes more carefully in order not to cause even greater economic damage.

Should a recession materialize, current inflation and interest rate concerns would be overdone.

Although the economic environment would remain unfavorable, the central banks would then have to reconsider their tightening course.

Another inflation driver are the supply chain problems, which are mainly caused by the strict corona lockdowns in China.

Irrespective of the discussion as to whether or not the harshness was justified, there are currently some indications of a relaxation.

Should the supply chains run better again, the supply-side problems, especially in production, might not be completely, but noticeably resolved.

There are still favorable scenarios that have a certain probability.

If they do occur, the magnitude of the recent price declines may have been exaggerated.

Total failure unlikely

The big unknown is the Ukraine war and with it a further escalation in the relations between the NATO countries and Russia.

The fear of gas supply failure is driving business and politics.

Production losses could occur.

However, a sudden total failure of the energy supply is unlikely, especially since alternatives have been worked on for months.

After all, externally enforced energy saving for households and companies would be good preparation in the fight against climate change and for the transition to a sustainable economy.

Hope dies last, or to put it another way: "If you're going through hell, keep going." The quote, apparently mistakenly put into the mouth of the former Prime Minister of Great Britain, Winston Churchill, testifies not to a fatality, but to the Perseverance, which is necessary in order not to let adverse circumstances throw you off your path.

In the state of shock one stops in hell.

Therefore it cannot be a solution.

The aim is to keep the wealth stable.

That would be a return in excess of long-term inflation.

That's hard enough, and wealthy investors would be happy if they achieved that goal.

In view of the price exaggerations after the Corona crash in spring 2020, it should not be surprising if the markets take the indeed adverse circumstances as an opportunity to put a downward strain on prices.

A real relaxation is not in sight in the coming weeks.

Deutsche Bank's chief investment strategist, Dirk Steffen, expects earnings forecasts to be revised when the companies present their reports for the second quarter.

Even if further price declines are still to be expected, investors must always be aware that things will go up again at some point.

The analysts at the American bank JP Morgan attribute the current stock market sell-off to the fact that the average investor is assuming an economic disaster.

Should the disaster not occur, recovery could begin.

There's also a positive aspect to the sell-off: lots of cheap entry opportunities.