Early trading on Tuesday saw a slight dip in the German DAX index, opening around 24,200 points – a 0.5% decrease from the previous day’s closing level. While Infineon, Deutsche Telekom and Deutsche Börse led the gains, Symrise, Rheinmetall and Siemens Energy followed suit later in the session.
The market sentiment appears increasingly cautious, prompting a critical question among investors: how much further can these record highs sustainably extend? This apprehension is fueled by the simultaneous record-breaking performance across global markets, including the Euro Stoxx 50, FTSE 100, Nasdaq 100, S&P 500 and Nikkei 225.
“The markets appear to be in a frenzy” observed Thomas Altmann of QC Partners, highlighting a broader concern about inflated valuations. Historically, November has been a stronger month for equities than October, typically marking the start of the “Santa Claus Rally”. However, the current record-breaking trajectory raises the possibility that this seasonal surge may be occurring prematurely.
Of particular concern is the escalating risk embedded in these soaring valuations. The S&P 500 has now reached its highest Price-to-Book ratio ever recorded, while the Nasdaq 100’s Price-to-Cash Flow ratio mirrors the peak levels seen during the dot-com bubble’s collapse. These metrics are triggering alarm bells for analysts. “Several warning signs are currently illuminated” Altmann warned, suggesting a potential for significant market corrections should underlying economic realities fail to justify the current exuberance.
The euro strengthened marginally against the dollar, trading at $1.1658. Conversely, oil prices experienced a notable decline, with Brent crude falling to $64.68 per barrel – a decrease of 1.4% from the previous day’s close. This drop may reflect underlying macroeconomic anxieties and potentially foreshadow further volatility as the year draws to a close. The question remains whether this current momentum can be maintained or if a period of consolidation, or even a correction, is on the horizon.
