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From New York to Frankfurt: Stock prices are already plummeting again
When, as in these days, the stock exchange rates collapse, it is time for "Legendary investors", to enter the scene. Their task is to make sense of the often irrational price movements on the markets. The words of the gurus are listened to with rough devotion by the financial community. They act as projection surfaces for the desires and fears of the stock market public.
One such Borse savant has spoken out this week: Mark Mobius, who pays to the primitive of the media financial hype, has told on the financial channel CNBC that he considers the risk of the formation of a dangerous "Double top"-formation in the U.S. SP 500-stock indix sees. Investors, Mobius says, are increasingly worried about an unclear outcome of the U.S. elections.
While true professionals nod knowingly at such words, for non-initiates who don’t love to speak Borse latin, they need to be explained: a "Double top"-Formation is a potentially unpleasant thing in the nomenclature of financial market patterns. Because it signals that after a rise and a subsequent fall in prices, the next rise will be stuck at a resistance – and then the prices will fall.
The prime example of a double top is the "Dot Com"-Crash at the beginning of the new millennium: The stock market indices of international stock markets had reached a high point at the beginning of the year 2000 after frenetic price increases. This was followed by a sharp drop in prices, followed by a recovery. But this new rise proved to be a trap, as prices reversed course. This was followed by several years of Borsenmalaise.
So when Mr. Mobius, whose appearance reminded older people of Detective Lieutenant Kojak, younger people of Captain Jean-Luc Picard, announces on the CNBC channel, as has now happened, that he has a "Double top" If Mr. Mobius thinks he can recognize a double top, he means that there could be danger ahead on the stock markets.
Mobius identified the Democratic presidential candidate Joe Biden as the root of the trouble. "A Biden victory will likely be bad for the U.S.-market and thus be bad for other markets around the world", according to the veteran stockbroker. "But it will be short term, because a lot will depend on what measures Biden actually takes." If he doesn’t raise taxes again, that’s good for the markets.
As if they had been waiting for his command, the market indices plummeted again the day after Mobius’ interview: The Dax lost more than 4 percent on Wednesday with -503.06 points – according to influential financial market research, this corresponds roughly to the return to be expected on the stock market in an average year over decades. The Dow Jones index was down nearly 3.5 percent at well over 900 points, while the Nasdaq technology stock market was down more than 3.7 percent.
Whether Joe Biden, should he become president, will heed Mr. Mobius’ thinly veiled hint that he should not raise taxes is not certain. What is certain, however, is that the prospect of Borsen gains has a significant impact on electoral behavior. It is an open secret that many voters, such as Florida retirees, are voting for Donald Trump primarily because they hope he will boost stock prices.
Now, of course, it could be argued that the recent performance of the stock market, despite Trump, has left a lot to be desired. It could be countered, as others besides Mr. Mobius have done, that it is the prospect of a Biden election victory that is causing fear in the markets. The current price losses were thus for those Americans, whose retirement provision depends on the stock market, and that are many, to be understood as a call not to vote for the Democratic candidate.
But whether the prospect of a possible policy change in Washington is at all related to the current stock market development, even that is not clear. After all, not only the American, but also the European stock markets have seen drastic price drops. So perhaps it is not the U.S. presidential election, but perhaps the prospect of a pandemic spiraling further out of control, to which the falling prices are attributable.
In any case, the Faz reports that the German stock market is moving in view of the new Corona decreases "Downward at a pace faster than feared". The Tagesschau, too, says it is the fear of a second lockdown that is leading to the price slumps. Who or what is really responsible for the losses, whether Joe Biden or the Corona virus or the double top, will only be known afterwards, if at all. Until then, Mr. Mobius could be right, even if he is wrong.