Article / 18 December 2012 at 6:31 GMT

Outrageous Prediction: DAX plunges 33 percent to 5,000

Peter Garnry Peter Garnry
Head of Equity Strategy / Saxo Bank

The leading German stock market index DAX was one of the world’s best performing stock markets in 2012 as Europe’s economic juggernaut continued to fare better than most Eurozone countries, despite the crisis on the continent and weaker activity in China. This will all change in 2013 as China’s economic slowdown continues, thereby putting a halt to Germany’s industrial expansion. This causes large price declines in industrial stocks due to stagnating revenue and declining profits at major industry players such as Siemens, BASF and Daimler. This market stress deflates consumer confidence and as a result domestic demand, highlighted by weak retail sales. With domestic demand failing to offset weakening exports, approval ratings for Chancellor Angela Merkel plunge ahead of the German election in the third quarter, and ultimately the deteriorated economic situation obstructs her re-election attempt. With a weak economy and uncertainty about a new government, the DAX index declines to 5,000, down 33 percent for the year.

njaisson njaisson
I have heard the same story from the buy side for the last three year. The Dax is going to plunge! This dire disinformation is designed to make the retail traders lose money by leveraging the public fear, which is the best ay to push the retail investors to unfortunate action. The institutional investors adopt the opposite strategy: they buy when everyone else is selling. This is a very common experience which has been confirmed so many times on many different markets like gold, silver or currencies like the euro, or the US$. The euro may be the best example of how the portfolio managers are selling fear to the gullible public convincing them to sell when they conceal the fact that the FX market is nothing but free, due to the intervention power of the central banks, like the ECB or the FED.
njaisson njaisson
I would rather say that the Dax is on its way to the 8,000 mark by Christmas eve and then will be rife for a Fib correction of 23% to 38% between the beginnig of Jan and the end of Feb 2013. i don't know many portfolio managers who have been able to predict by the 1st of Dec 2011, that 2012 will be the recovery year for the Euro and the Eurozone (I did it!!), though it had been announced by the Head of the ECB by the end of 2011. Now the portfolio managers are repeating the same mistake all over again on the basis of the overbought/oversold strategy, which is a poor way to analyze the market, though it can bought easily by the novice trader.
Peter Garnry Peter Garnry
@njaisson: I know it is called an Outrageous Prediction, but it is not a prediction (confused?) which is also stated in the foreword by our Chief Economist Steen Jakobsen. It is an attempt to come up with events that would truly be outrageous if they happended in 2013 because consensus is the other camp.


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