Stock markets: Deutsche Bank warns of correction of 5-10%

Stock markets: Deutsche Bank warns of correction of 5-10%

According to a report by finanzmarktwelt.de,

US stock markets recently hit new record highs, but Deutsche Bank warns of an impending correction. Christian Nolting, global chief investment officer at Deutsche Bank, predicts a possible correction of 5% to 10% due to the slowdown in the US economy. The exaggeration in interest rate cut expectations and the positioning of Nasdaq 100 futures are cause for concern.

According to Nolting, the U.S. economy could see just 0.8% growth this year, compared to a forecast of 2.3% for 2023. This slowdown would also affect stock markets, which could lead to a correction. Swap contracts tied to Fed meetings are currently pricing in up to six interest rate cuts in 2024, suggesting excessive expectations.

Citigroup also warns about the current positioning of Nasdaq 100 futures and potential profit-taking that could jeopardize the ongoing rally. Still, some investors continue to believe in the rally, and options traders are betting on further gains for the S&P 500.

Deutsche Bank expects equity market consolidation to begin after the current earnings season ends, but this could also be used as an entry point. Nolting also sees potential through possible setbacks as a new entry opportunity.

Fourth-quarter gross domestic product and inflation data on Friday could provide further clues about the strength of the US economy and inflation trends.

The warnings from Deutsche Bank and other financial institutions could lead to increased volatility and possible corrections in the stock market. Investors should therefore follow developments closely and weigh up potential entry opportunities and risks.