In "The Markets on the Couch - The Live Commentary on the Closing of the Exchange" you will learn on 1. June 2018 at 5:00 p.m. shortly after close of trading more about the opportunities and risks of the next trading week. GKFX expert Kristian Volaric explains which volumes and volatility are expected on the markets in the coming trading week. That's why traders already know on Friday evening what they could face in the new week. Volaric deals with different types of traders and names suitable investment opportunities.
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Geopolitical issues on the stock exchanges
Currently are geopolitical questions the big issues on the stock exchanges. Some current political events could have an international impact on the mood at the trading centers. Bad news is coming from the USA and Italy in particular and the government of Mariano Rajoy is also getting increasingly deep into crisis in Spain. So far, the DAX has been able to cope with these negative reports quite well. Could the old stock exchange saying "Sell in May and go away" be confirmed this year? This year it is worth taking a closer look at this saying.
Government formation in Italy failed
In Italy, it was assumed that a new government from the right-wing populist Lega and that as left-wing populist classified five-star movement with the lawyer Giuseppe Conte, who was previously completely unknown in politics, as head of government. Both parties are considered skeptical of the EU. The parties' plans include more funds for social spending, tax cuts and the retirement of pension reform. Some economists have already issued warnings of a new debt crisis.
However government formation failed last weekend after President Sergio Mattarella vetoed Paolo Savona as Minister of Economy. Savona is regarded as a Eurosceptic and has caused unrest on the financial markets several times with provocative statements. Among other things, he described the country's entry into the euro as a historical error.
Transitional government until new elections
The Lega and the 5-star movement massively criticized Mattarella's approach and demanded that he be deposed, what the However, the crisis in Italy could worsen. Mattarella could now deploy a technocratic government until new elections, which could possibly take place in the fall. For the formation of this transitional government, he proposed economist Carlo Cottarelli, who previously worked at the IMF. This personnel could also calm the financial markets.
Headlines from the USA
In the USA, Donald Trump makes headlines almost every day. A single tweet from the US president can cause unrest. He recently canceled the meeting scheduled for June 12 in Singapore with North Korea's dictator Kim Jong Un, but only a few days later he changed his mind again, saying that the meeting may still go ahead as planned. The tensions between the two countries could therefore increase again. The dispute over trade tariffs is also not resolved. In the United States, VW and Daimler are currently also in focus because of possible violations of exhaust gas laws. In addition, Donald Trump spoke of increasing tariffs on imported cars, which could put further pressure on automobile manufacturers' prices.
International events affecting the stock exchanges
These events could occur in the next weeks and months will have further effects on the international stock exchanges. In the USA, for example, economic data are currently taking a back seat; international crises overlay these reports. In particular, the tariffs announced by US President Donald Trump could have far-reaching effects on the economy in the euro zone. The purchasing managers' index for manufacturing and services has already declined in the last survey. This suggests a worse mood in the industry. The Ifo business climate index did not fall further, but remained at 102.2 points as in April.
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Sell in May and go away?
Do you believe the "Sell in May and go away "rule, it is traditionally not going well on the stock exchange in May. Therefore, investors should sell their shares this month and only come back to the market in September ("Sell in May and go away. But remember to come back in September.").
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There is something in this market wisdom. As with peasant rules, such statements often have a real core. In the summer months, many market participants are on vacation. Therefore, activity on the stock exchanges is less. For this reason, bad news can have a greater impact on courses in the actually rather low-news period of the year. There are generally no dividend forecasts during the summer slump.
Study on "Sell in May and go away"
The "Sell in May" rule states that investors between October and April can earn more than between May and September. An analysis by Fidelity International seems to confirm this at first glance. This statistic indicates that if investors had followed the "sell in may" rule in the past 30 years, they would have made significantly more profits to date. Assuming that an investor has invested 10,000 euros in the DAX, he would have gained more than 133,000 euros with breaks from May to September. Without a break in the summer months, his profit would be about 20,000 euros lower.
Does "Sell in May and go away" therefore represent a good strategy for investors? On closer inspection, Fidelity's study also shows that "Sell in May" has only worked 16 times since 1988. In 14 years, this would have resulted in a loss. Thus the chance of success of the rules is only 50 percent and is therefore not recommended for investors as a safe and promising strategy.
Variation "Sell end of May"
Some Economists have changed "Sell in May and go away" into "Sell end of May". Accordingly, investors should sell their investments at the end of May and only start trading again at the beginning of October. Could such stock exchange wisdom and calendar patterns be worthwhile for investors? In general, it is not recommended for investors to rely on such uncertain rules. They are not based on facts or indicators and are therefore not objective. Investors should therefore not choose entry and exit points on such an uncertain basis.
Crises could shape summer
However, this year it certainly looks like political Crises this summer will accompany. Indeed, this could be a reason for some investors to part with their investments. Rising interest rates in the US could make stocks less attractive to investors. Recently, yields on ten-year US government bonds also passed the three percent mark, which indicates a strong dollar, among other things.
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Conclusion: Political crises depress mood on the markets
In the GKFX webinar "The markets on the couch - The live commentary on Market close " on June 1, 2018 at 5:00 p.m. shortly after the market closes, traders will find out how the markets could continue in the next week. Kristian Voalric comments on the just ended trading week and explains which volatility and volumes are expected for the coming week.
Currently reports from the USA and Italy are particularly concerned>for unrest in the markets. In Italy, a possible government between the right-wing populist Lega and the 5-star movement located in the left-wing populist spectrum burst at the weekend. President Sergio Mattarella spoke out against Eurosceptic Paolo Savona as the new Minister of Economic Affairs. A transition government led by former IMF economist Carlo Cottarelli could now lead the country to new elections.
In the United States, Donald Trump's announcement recently caused his planned meeting with North Korean dictator Kim Jong Un
May this year the old stock exchange saying "Sell in May and go away" apply? Investors shouldn't base their strategy on this kind of wisdom, but this sentence also has a true essence. In the low-news summer months, bad news can easily gain more punch. This year the current political crises could accompany us through the summer.
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