Stock market rally continues!

Most stock markets have exhibited impressive performance since the beginning of the year. Germany's DAX index cleared the hurdle at 15,000 points at the end of March and thus hit our target for year's end sooner than expected. Surprising many investors, euro zone stocks have performed very robustly despite continuing or even tightened economic restrictions and only slow vaccination progress compared with other countries and regions. Expectations of a strong economic recovery this year are the main reason for the positive stock market trend. Two questions arise for investors who have so far missed the rally. Does it still pay to enter the stock market, and if so, which stocks and regions are especially promising?

We believe there are also good reasons to expect the positive stock price trend to continue from a fundamental perspective. The improved economic prospects have prompted corporate analysts to raise their earnings estimates in the past months. And it gets even better. We believe it is likely that earnings expectations for this year and next do not fully reflect the true extent of the economic recovery. But what should one make of the argument that a price bubble has formed and could soon burst? This is primarily a result of very accommodative central bank monetary policy. But since the US Federal Reserve and European Central Bank are not going to adjust interest rate policy in the coming months, the fact that stocks as well as all other asset classes are valued high is probably not going to change. Since, in contrast to the "normal" nominal yield on a 10-year German government bond (Bund), the real yield on a 10-year inflation-protected bond has dropped to a new record low, this even increases the latitude from a valuation perspective. We are therefore raising our DAX price target to 16,500 points.