Podcast

April 2024 caused a stir in the capital markets and exceeded many expectations. At a time when critical voices often prevail, the stock market showed its most robust side. In his latest analysis, Zsolt Janos examines the surprisingly strong developments, debunks old stock market wisdom, and provides insights into the psychological mechanisms of the markets as well as the latest decisions of the US Federal Reserve.

An April for the history books: The unexpected stock market boom

Contrary to many pessimistic forecasts, April turned out to be one of the strongest months in recent stock market history. While sentiment was often described as "appalling," the indices showed an impressive performance:

• The Dow Jones Index In April, it increased by an impressive amount. + 7 percent .
• The Standard & Poor's 500 Index recorded an increase of + 10 percent.
• The Nasdaq Composite exploded by + 15 percent.
• The more broadly based Russell 2000, which also includes smaller companies, increased by + 12 percent.

Such strong monthly performance is rare and required looking back to 2002 to find anything similar. Individual companies such as Intel experienced their strongest month ever, also Amazon, Google and Atlassian (with a jump from + 25 percent (after the figures were published) shone and contributed to the positive image.

The myth of "Sell in May and Go Away" – What the statistics really say

Given the strong April figures, many investors are wondering about May and the well-known stock market adage "Sell in May and go away." Zsolt Janos puts this into perspective and debunks the myth:

• The idiom originates from a completely different industrial context and an earlier time.
• The statistics show: Since 1950, May has been in 90 percent of cases positive, if April showed a similarly strong performance.

A strong April often indicates existing momentum that attracts further capital. Price corrections do not arise solely from sharp increases, but also from unexpected shocks or a fundamental shift in market sentiment. The mere fact that prices have risen sharply is not a reason for a sudden trend reversal.

Market psychology and stock price trends: Why stocks rise (and fall)

Markets don't move arbitrarily. Prices rise as long as investors are convinced they can still buy at higher prices in order to sell later at an even higher price. This collective conviction, supported by a plausible "story" or justification, drives the buying. If this story collapses or weakens, a wave of selling begins. A recent and striking example of this is... AI segment.

The downside of the AI ​​boom: From hype to reality

The initial hype surrounding Artificial Intelligence (AI), triggered by ChatGPT and the massive need for Data centersThis led to immense investments and spectacular share price increases. Initially, the question of the specific business model was secondary; what mattered was who invested in expanding capacity.

But market participants are beginning to rethink their approach and ask more critical questions. Recent figures from major hyperscalers, including Meta (which plans to invest an additional 10 billion US dollars in AI capabilities), shows that the market is now asking more precise questions: "How do you plan to make money with this? What does your AI business model look like?" Many large companies are now investing more in capital expenditure expansion than they actually earn. Mere willingness to invest is no longer enough to convince investors.

An exciting vision is the development of personal AI agents on mobile phones, which could partially make cloud systems obsolete. This would trigger a new competition: first between people with and without AI agents, and later between people with more advanced AI agents. Interestingly, not only software and chip developers would benefit, but also... "Shovel producers" Who Caterpillar, who are building the huge infrastructure for the data centers.

Focus on the Fed meeting: Interest rate signals and independence

The latest meeting of the US Federal Reserve (Fed) was crucial, according to Zsolt Janos, even though interest rates remained unchanged. Jay Powell sent a clear signal to all those hoping for imminent interest rate cuts (especially in the US). Real estate sector):

• Four FED members They voted against a clause that would have promised interest rate cuts under certain conditions – an unusual occurrence not seen since 1992. One member, Myron, appointed by Donald Trump, consistently advocates for interest rate cuts.
• Jay Powell himself announced that he would remain on the board to ensure the Independence of the Fed to maintain this principle and not be guided by political influences (e.g., Donald Trump). He emphasized that decisions should be made based on data and in a neutral manner.

In addition, the Anatomy of Inflation This is increasingly being discussed. A rise in oil prices, which increases energy costs, acts like an automatic interest rate hike, as it withdraws liquidity from the market and reduces purchasing power for consumption. In such phases, interest rate cuts could support the economy, but they also carry the risk of speculative excesses due to cheaper credit liquidity.

Selective stock picking instead of blind buying: The new era in the capital market

The results for the first quarter showed an extreme range: companies shot up by +25 to +30 percent up high or fell over -15 to -20 percentThis illustrates that the days of the blanket statement "everything is washed to the surface" are over. Stockpicking – the careful analysis of individual companies and their business models – is more crucial than ever.

Interestingly, uncertainty often leads to increased savings rates. When sentiment shifts, this liquidity can flow into consumption or investments, which in turn attracts profits and investment capital. However, simply standing on the sidelines, while emotionally understandable, is not a viable option for long-term wealth accumulation in many situations.

Dealing with "flagpoles": Strategies for parabolic price increases

What should you do if parts of your portfolio shoot up "rocket-like"? Zsolt Janos advises against jumping into trading from a stable long-term portfolio. Instead, he recommends strategic considerations:

• Define target milestones: Especially in more speculative satellite sectors, one should consider in advance what to do in the event of extreme price increases.
• Stop monthly purchases: In the event of sharp increases, it may be advisable to temporarily suspend savings plans for these positions in order to avoid unnecessarily increasing the average purchase price.
• Rebalancing: If a position that was originally intended to make up 3-5 percent of the portfolio explodes to 10-15 percent due to a strong surge, parts can be sold to realize profits and rebalance the portfolio structure.
• Reinvestment: The realized profits can be invested in new positions or in undervalued, but healthy Portfolio segments can be reallocated. However, blindly reallocating assets into "unhealthy" structures is counterproductive.
• Tax aspects: Capital gains are taxable. Paying the tax in the interim shifts the tax base and is a reality one must face instead of speculating on unlikely political changes.

Regret for selling too early ("I wish I had stayed in") is a psychological trap to be avoided. The goal is a structured approach that secures profits and aligns the portfolio with one's own objectives, instead of chasing theoretical maximum returns that often only become apparent in retrospect.

Conclusion: Strategy and adaptability are key.

April 2024 impressively demonstrated that the stock market is always good for surprises. In an environment characterized by dynamic developments in AI sector, a determined Fed policy Given the increasing selectivity of the market, sound analysis and a clear investment strategy are essential. Blind faith in old adages or blanket purchases will not lead to success. Rather, selective stock picking, a well-thought-out Portfolio rebalancing and an understanding of market psychology is crucial in order to optimally utilize opportunities in the capital market and effectively manage risks.

Would you like to review your investment strategy or do you need support in structuring your portfolio? Zsolt Janos and his team are at your side with professional expertise to help you achieve your financial goals.

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