The economic development in the industrialized countries of the western hemisphere and in the emerging markets has seen a much stronger growth in the latter in the years before the crisis. Since then a lot has changed. Crude oil prices have been falling to levels, which were deemed impossible five years ago. Crude oil is now at levels of the 1970's. It is worth to remember headline news from “Peak Oil” and new technologies like oil extraction from shale and oil sands, which should counter the reduction in conventional oil drilling.

The sharp fall in all commodity prices has hit the emerging markets hard. This, in combination with homemade problems, like corruption and rising geopolitical tensions has stopped the positive development in these countries.

The peripheral countries in Europe are for the first time since the Euro-crisis growing stronger than core Europe. This is strengthening the economic development strongly, since Europe is now much more balanced in economic terms than years ago. Additionally the low commodity prices are having a positive impact, since this is increasing the disposable income of the population and increasing consumption of the people.

Although the year had a bumpy start due to the developments in China the long term positive trend should stay also for 2016. Companies are still in a healthy state, only the dynamics of earnings growth are muted. Compared to bonds the valuation is still cheap, since the yields of government bonds in some markets are in negative territory in short- and even medium term maturities.

The Austrian Stock market has in 2015 outperformed the European markets after a long period of underperformance. This is due to cheap valuation as well as positive earnings from the listed companies. This trend should continue in 2016 as well.


Author:
Martin Bruckner
Member of the Management Board
Allianz Investmentbank AG
CIO Allianz Group Austria
1 February 2016

Note

Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.