Stock market does not usually run away in May and June

Our biweekly publication ‘Monitor' provides you with a structured overview of current capital market developments.

Current market commentary

In line with typical April seasonality, risk assets gained over the last few weeks while the US dollar depreciated. Continued encouraging economic data and a positive start to the Q1 reporting season helped. However, there are now increasing warning signs that suggest limited upside potential for equities in the coming weeks: tax debates, optimistic investor sentiment, insider selling, ambitious valuations, deteriorating seasonality and a muted equity reaction to positive surprises. We expect more volatile markets into the summer and are reducing our equity exposure accordingly from a moderate to a slight equity overweight. The low equity exposure of systematic strategies, higher cash holdings of fund managers and private investors as well as the (still) ongoing central bank support should limit the downside potential. Corrections are likely to be seen as buying opportunities by many investors.

Short-term outlook

The Canadian central bank has already adopted a somewhat more restrictive tone at its last meeting. The market is now eagerly awaiting the outcome of the Fed meeting on 28 April. On the same day, US President Biden will address the US Congress for the first time. Among other things, the market-relevant tax plans are likely to be discussed here. On 6 May, the Bank of England will hold its monthly meeting. This Tuesday, US consumer confidence (Apr.) and on Thursday unemployment (Apr.) and preliminary inflation data (Apr.) from Germany, Eurozone economic confidence (Apr.) and US Q1 GDP will be released. This will be followed on Friday by Japanese industrial production data (Mar.), Chinese purchasing managers' indices (Apr.), German retail sales (Mar.), preliminary inflation figures for the Eurozone (Apr.) and Q1 GDP figures for several European countries. The following week, the US ISM index (Apr.) and US labour market data (Apr.) will be published, among others.