Weekly Newsletter #17/2015

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What would you expect a risk-market to do, if the investors are confronted with weak economic data?! Well, I bet you first answer is, that you expect the market to go down. And that is the only logical answer you can give. But in nowadays markets you probably would not win a lot of money with your answer. Cause investors are acting in an environment, which is heavily controlled by central banks. In former times central banks policy was intended to flatten the extremes of the economic cycle, to keep inflation and economic growth in a reasonable window. Nowadays central banks propagate, that they are still doing the same. But nearly everyone is aware of the fact, that central banks measures act as artificial support for the markets these days and have nothing to do with the tasks they had in mind a few years ago.

The economy and the data from the market have become much more unimportant to the market participants. It is more important if central banks maintain interest rates as low as possible and provide huge amounts of liquidity to the markets, pushing the quotation of the risk markets higher and higher. So you don’t really care if economic data are bad, as long as you can be sure, that bad economic data would cause central banks reaction to increase or maintain the support for the market. So bad news are actually good news for investors in this case. Central banks are the real kings of the market. “Long live the King”. Cause if he dies, the awakening will be very painful.