So far, little volatility despite high economic policy uncertainty in the US
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Current market commentary
Easing fears about tariffs and growing hopes for peace in Ukraine have recently given a further boost to the euro and European equities, particularly those with a direct or indirect link to Eastern Europe. Hong Kong stocks were also among the biggest gainers, while bonds continued to trade directionless due to uncertainty as to whether the current environment is actually inflationary or disinflationary. After all, there are good arguments for both sides, such as the possible productivity boost from artificial intelligence or the stronger deglobalization through the “American First” policy. In any case, the latest US inflation figures were higher than expected and than in the previous month. Precious metals continue to show a strong upward trend. Gold is approaching the USD 3,000 mark, also driven by the ongoing uncertainty and the fear of a further increase in (US) debt. In any case, the markets remain exciting and, in view of the uncertainty, have so far been surprisingly less volatile.
Short-term outlook
A number of important decisions are pending over the next two weeks. On the one hand, the parliamentary elections in Germany, which will be held on February 23. On the other hand, the G20 foreign ministers will meet at the beginning of the week, followed by the G20 finance and central bank ministers on February 26 and 27. At the end of the reporting season, just under 21% of S&P 500 companies will report.
On Tuesday, the ZEW Indicator of Economic Sentiment for Germany (Feb.) will be reported, followed by the consumer price index for the UK on Wednesday. This will be followed on Thursday by the initial jobless claims and the Philadelphia Fed Manufacturing Index (Feb.) for the US. At the end of the week, the preliminary PMI's for the manufacturing and services sectors (Feb.) for Germany, the UK, the US and the eurozone will be released. Next week, the ifo business climate (Feb.), GDP (Q4) and the consumer price index for Germany are on the agenda.
So far, little volatility despite high economic policy uncertainty in the US
- Economic policy uncertainty in the US has increased significantly since Donald Trump's election victory. The current level was previously only observed during economic crises.
- Historically, this has usually been accompanied by a high degree of volatility on the stock market (VIX index).
- The current calm on the stock markets is surprising. If Trump continues in this way, the economic and political uncertainty is likely to make US equities, which are already highly valued, more susceptible to corrections.