In the month of October asset markets fell victim to some pent up emotions that had been bottling up over the year. These were mainly political in nature and the three issues that preyed most on investor’s nerves are: the conflict between the USA with China, the public disagreement between President Trump and the Federal Reserve and European concerns, in particular with Italy and the UK. By the end of October, many investors had reached the point where they decided to take steps to reduce their exposure to these risks, and therefore positions were hedged, sold or portfolios otherwise rebalanced.
The economic and fundamental issues have had an excessive impact on European markets, with European equity markets among the worst performers globally– not only because of specific concerns with regards to "Dieselgate" or risks associated with a global economic slowdown. Rather, investors lacked confidence in the outlook generally and Europe was underweighted in response to these concerns.
Austria was not immune to these developments – despite hitting new highs briefly in September. Although Austrian companies mainly reported in line with expectations, this was – as indeed was the case with other European peers – no reason for a relative outperformance.
By the end of October, stock markets calmed down again fairly quickly. Signs of willingness for a consensus approach between USA and China gave markets some respite. In line with this development, negotiations between the EU and the UK looked rather more conciliatory. Meanwhile, Italy also tried to limit its ‘"loss of face" and hopes for creativity in the interpretation of their previously rejected budget proposal emerged.
Now the focus of market participants will move to 2019. Although economic growth expectations for next year have already been reduced, they still reflect in relation to current market prices an excellent entry level. Without a doubt, when the ominous ‘’political clouds“ pass by, a forgiving end of the year can be expected.
Author:
Wolfgang Matejka, CEFA
Managing Director of Matejka & Partner Asset Management GmbH
7 November 2018
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Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.
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