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Markets Update September 2021 - Markets: Bad news are good news - but only sometimes

Bad Homburg, 09/20/2021
by Dr. Eduard Baitinger, FERI
  • Weak economic data from China
  • Risk scenarios intensify
  • European equities remain interesting 

Negative economic data are currently dominating the markets. The data situation in China in particular has deteriorated noticeably. For the time being, the Middle Kingdom is not providing any positive impulses for the global economy. Most companies have revised their outlooks downwards. Cyclically sensitive equities are relatively weak and important industrial commodities are losing ground. The bond markets are also sending serious signals, with corporate bond spreads increasingly pointing upwards as investors doubt the solvency of companies and demand higher risk premiums.

In view of this situation, it is surprising that global stock markets have not sold off more strongly recently. One explanation for this is global monetary policy: central banks continue to be ultra-expansive and provide the markets with ample liquidity. This has led to a situation in which even bad news is interpreted positively by market participants - according to the motto: weak economic data ensure a continuation of the generous supply of liquidity by the central banks. In the medium term, however, there are signs of a liquidity brake: the European Central Bank has already announced that it will moderately reduce the volume of bond purchases at the end of the year, and the US Federal Reserve is likely to follow suit in the coming weeks or months. If liquidity then becomes scarcer again, the market will react with "withdrawal symptoms".

European equities in focus

Despite catch-up potential, European equities have not been able to post sustained gains in recent months - partly because they are heavily dependent on business in China. The upcoming Bundestag elections are also causing caution: according to current surveys, Germany is threatened with a shift to the left or at least a very tough government formation and thus a prolonged period of uncertainty. However, these risk scenarios should soon be largely priced in by the markets and therefore only temporarily dominant.

In China, on the other hand, the picture is so weak that stimulative fiscal and monetary countermeasures can soon be expected - again in line with the motto: "Bad news is good news." So despite the negative factors, professional investors should not write Europe off entirely.


About Dr. Eduard Baitinger

Dr. Eduard Baitinger has been Head of Asset Allocation in the FERI Group since 2015. He is responsible for quantitative asset allocation at FERI Trust, where he also manages and coordinates numerous research projects. In close coordination with the FERI Board of Directors and Chief Investment Officer, Dr. Heinz-Werner Rapp, he also represents the investment strategy of the FERI Group and its communication to clients and customers of FERI.

Before joining FERI, he was a research assistant at the University of Bremen and financial analyst for an asset manager. In 2010 he completed his studies at the University of Bremen, accompanied by a stay abroad in New York, as a graduate economist. In 2014, Eduard Baitinger received his doctorate with distinction on new approaches to quantitative asset management. Dr. Baitinger publishes regularly in academic journals and acts as academic reviewer.


About FERI

Founded in 1987 and headquartered in Bad Homburg, Germany, the FERI Group has developed into one of the leading investment houses in the German-speaking area. FERI offers tailor-made solutions for institutional investors, family assets and trusts in the following areas:  

The FERI Cognitive Finance Institute was formed in 2016. It is the strategic research centre and creative think tank of the FERI Group. The Institute focuses on innovative analyses and the development of methods for long-term oriented economic and capital market research. 

FERI and MLP currently manage assets of EUR 51.4 billion, including EUR 13 billion in alternative investments. The FERI Group is headquartered in Bad Homburg and has locations in Dusseldorf, Hamburg, Luxembourg, Munich, Vienna and Zurich.



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Member of the Management Board
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T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

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Katja Liese
Member of the Management Board
Head of Press & Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

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