EMR June 2024

Dear Reader


With regard to short- and medium-term expectations, most forecasts can be described as rather pessimistic. We believe that they can neither be considered promising nor relatively coherent. In this EMR, we will focus on the average developments of various stock indices in order to derive a likely, realistic outlook.

The following graphical representation of selected share indices speaks for itself. The changes in the shown indices indicate a clear dichotomy between the US indices, as well as partly also for Japan and all other indices. One specific and relevant conclusion that can be drown from the graph, for the current year 2024, relates to the most obvious disparities. In our opinion, there is little doubt that technological differences and currency changes have played – and will continue to play, a significant role in country allocation.

The annual growth rates differ considerably from index to index. One may wonder whether this is not a deterministic indication of the effects of the respective explanatory variables. The particular determinants should indeed be analyzed in detail and specifically as they do not have the same, coherent impacts. In terms of forecasting, we believe that this approach is indeed crucial. We assume that the result of the upcoming US presidential elections could pose particular problems of interpretation.

At this stage, we assume that the upcoming US presidential elections will once again play a decisive role. When interpreting the chart of the DJIA over a fairly long period of time, two quite different deterministic developments stand out. The first one ranging from 1945 to the end of the 1980s. In this period the trend has been relatively stable and somewhat monotonic in terms of the relevant definitions: “year start”, “year high” and “year close”. On the other hand, the divergence since the beginning of the 1990s is indeed astonishing and very revealing, isn’t it? The long-term, historical comparison remains a very delicate matter. One may ask him/her whether the slogan “as the US market goes, so go most industrial markets” is still valid and deterministic? If you answer yes (or no) to our question, we would appreciate it if you could tell us why so?


When analyzing the available data on US election years since the early 1980s, one comes across a rather surprising piece of information. One may wonder whether the US presidential election in 2024 could prove to be a significant market-moving catalyst, as it has in previous periods, or whether it will go almost unnoticed, despite the media’s loud jargon. Barring an extraordinary development, this year’s presidential race looks like a repeat of the 2020 election except that the White House, Senate and House of Representatives may each flip to the other party with no “clear sweep” that would give either party unbridled power. At the moment, one may ask, what have been the real determinants to focus on in order to make a credible prediction?

First of all, they point to rather subdued economic growth in the first six months of the year, hopefully followed by an upswing, depending on the outcome, i.e. the majority of the winning party. Since the first US president, George Washington, was elected in 1789, there have been 59 elections. In the context of investments, investor preferences must be taken into account, which should hardly be easy! Will the result be similar to that of the 2020 election, i.e. simply a reversal from Biden to Trump, or will Biden follow Biden, remains the difficult question. At this point, it should not be underestimated that the respective market developments under the Trump and the Biden administration have not been as different as is widely assumed, possible because the Republican party retained the House of Representatives where all money bills must originate.


Recently, many equity indexes have reached new all-time highs, while the macroeconomic outlook has remained subdued. This scenario is indeed surprising, especially when looking at the evolution of central banks’ balance sheets, which continue to focus on quantitative easing to reduce market liquidity and finally (or hopefully) to bring inflation under control! The main aim of the current policy is to “reduce securities liquidity” in order to bring inflation under control. Initially US banks, but increasingly also European banks, have started to buy their own shares on the market. It should be emphasized that not many analysts are talking or writing about this policy course. At this point, the question arises as to the purpose or objective of this policy and what impact it could have on market activity.

The purchase and repurchase of “treasury” shares support shareholders through deferred taxation, i.e. at the time of realization of returns they are treated to long term for tax purposes at a rate substantially lower than ordinary income rates. The alternative, paying out surplus earnings in dividends, results in a higher taxation rate. The positive impact on earnings per share (EPS) should also be taken into account, as it shrinks the available shares to the public. These factors help to explain the recent growth of most equity indices, don’t they?

Given the above factors, one would expect that what central banks take off their balance sheets will flow back into the financial markets in one way or another.

Suggestions welcome.



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