Why are stock prices up so much now?

Fear is a bad advisor.

But in the fall, many market participants were afraid.

Before a cold winter, a gas shortage with production shutdowns, horrendously rising gas prices, ever higher inflation, central banks that continue to raise interest rates and thus make money more expensive, an almost inevitable recession in this mixed situation.

The Dax is perhaps the best stock index to reflect the fears, because dependence on Russian gas was particularly high in Germany, and the gas-dependent industry is well represented in the Dax.

BASF boss Martin Brudermüller warned most prominently against idle factories in Ludwigshafen.

Daniel Mohr

Editor in Business.

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Today we suspect that many fears were exaggerated.

Since then, wholesale gas prices have fallen by 80 percent.

Thanks to the mild winter so far, the gas storage facilities in Germany are currently 91 percent full. A year ago at this time, the storage level was 47 percent.

Companies can again obtain energy much more cheaply, and private households also have more money than feared for consumption.

After its record high of a good 16,000 points a year ago, the Dax fell to below 12,000 points by the end of September.

On Thursday, for the first time since the beginning of the war in Ukraine, he again reached more than 15,000 points.

This year alone it has increased by a good 8 percent.

Since the September low, the increase is 27 percent.

The Dax took one of the strongest rises in the stock indices in the world.

Is this just a relief bubble that will soon burst again?

The price increase is underpinned by outstandingly good company results.

For the 40 Dax companies overall, the 2022 financial year was the best in history, despite all the adverse circumstances.

Not only did sales reach records thanks to the many strong price increases, which are reflected in the high inflation as a result, but according to current estimates, profits should also amount to 144 billion euros in the Dax in 2022, 5 percent more than in 2021 and more than twice as much much than in the first Corona year 2020. In the pre-Corona year 2019 it was 86 billion euros, ten years ago 64 billion euros and 15 years ago 27 billion euros.

The increased prices are therefore underpinned by good business by companies in Germany as well as in global stock indices.

Record payouts to shareholders are expected for 2022 this spring.

Is it already too late to start investing in stocks?

It's never too late for that.

To stay with the Dax example.

It started in 1988 with 1000 points.

Even in the biggest hype moment in the history of the index in March 2000, when investors willingly opened their wallets wide to every Internet booth and subscribed to shares with blank checks, the Dax was at a high of 8000 points, far lower than today.

At that time, the ratio of the book value of stock corporations to their price reached a value of 3.5, which has never been reached again.

1.5 is usual.

Pretty much the safest buy signal for stocks is when the value dips below 1.

But that only happens very rarely.

In March 2003, for example, with a Dax of 2200 points.

In 2007, shortly before the financial crisis, there was again a two before the decimal point – a sign of high valuation.

After the outbreak of Corona, the Dax briefly approached 1 again - it would have been a very successful moment of entry.