Inbox: Analysts: Bitcoin and Tesla – Have expectations already run too far ahead of reality?



Emailed from / found at: Raiffeisen Research

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From the weekly market outlook by Raiffeisen Reserch: The general mood on the stock markets has been very optimistic in the last few days of trading – forgotten are the turbulence surrounding the “WallStreetBets” topic. On the political side, the focus was on the one hand on the discussions about the planned one USD 1.9 trillion heavy US fiscal package the Biden administration and, on the other hand, the first joint telephone conversation between the neo-US president and his Chinese counterpart Xi Jinping. We expect the former to support positive equity market momentum, as it supports the likelihood of a substantial economic and earnings recovery in 2021. An atmospheric brightening between the USA and China could at least partially lead to an improvement in trade relations. But it should also be clear that the USA will not change its China policy entirely.

The company’s Q4 results are currently one of the main influencing factors. Here has the US reporting season has already passed its peak and it can be a clearly positive summary to be pulled. More than two thirds of the companies in the S&P 500 presented their figures and more than 80% of the titles exceeded the profit expectations placed on them. In this way, the decline in earnings expected for Q4 at -8.5% yoy before the reporting season was recently revised noticeably upwards. The bottom line is that year-on-year profit growth is realistic, which of course can be largely attributed to the sometimes very strong results in the technology sector, which is highly weighted in the USA (keywords: home office & online shopping).

The European reporting season, which traditionally starts a little later, is currently running at full speed. At the aggregate level, the companies on the “old continent” also managed to exceed the consensus estimates by the majority, albeit to a lesser extent than was the case with “Corporate America”. In addition, a year-on-year decline in profits is still to be expected in Q4. This is due to the low proportion of IT companies and the noticeably higher proportion of companies from sectors that have suffered more from the pandemic. That could change in the course of the year, however, as the widening of the upswing that we expect as part of overcoming the pandemic should play those industries in the cards. For the full year 2021 as well as for the following year, is for both the broad US and European stock markets robust earnings growth (The current consensus estimates are 24% for the S&P 500 and 29% for the Euro STOXX 50).

In the end, they were also economically Inflation data in the centre. While there was a strong upward push in the euro zone, that was not the case in the US in the middle of the week. Overall, this year we can expect spurts in consumer prices, but not sustained inflationary pressure. In this respect, we also consider the central bank’s leeway to be large enough to remain extremely expansionary in terms of monetary policy for a longer period of time. The stock market should therefore not be permanently burdened by this issue, as the companies can easily pass on inflation in total and the yield level should not increase substantially. The latter would put pressure on the valuations using a higher discount factor and the then lower present values ​​in the classic income approach (as in the DCF model).

For the stock markets, however, the inflation issue can meanwhile be the trigger for a consolidation / correction in the sentiment that is currently overheating. Two examples of the mood in the market at the moment can be found in our chart of the week. So he climbed Bitcoin has recently continued to rise strongly and is increasingly targeting the USD 50,000 mark. Elon Musk’s announcement that Tesla will soon accept digital currency as a means of payment and that Bitcoins worth USD 1.5 billion has also been bought provided a boost. Most recently, Mastercard announced that it would open its network to selected cryptocurrencies. The Tesla share price has recently only known one direction – namely upwards. We can certainly see that the acceptance and, above all, the use of Bitcoin as a means of payment has recently increased significantly, and also with regard to the topic Electromobility In our opinion, there are very good reasons to be optimistic. However, the question can certainly be asked whether, in the two cases mentioned, expectations are not already too far ahead of reality.

Overall, we remain optimistic about the development of the stock market due to the strong fundamentals we assume (economic and earnings recovery, supportive monetary policy). Whether the overheating tendency cannot be overlooked, however, setbacks in the meantime should not come as a surprise.


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