Stock market jitters

Plenty of Cash Against a Crash

ARCHIV - Händler sitzen unter der DAX-Anzeigetafel am 05.06.2014 auf dem Parkett der Deutschen Börse in Frankfurt am Main. Foto: Boris Roessler/dpa (zu dpa "Dax startet Stabilisierungsversuch" vom 10.02.2016) +++(c) dpa - Bildfunk+++
The merged Frankfurt and London stock exchanges could be based in the Netherlands to end a Brexit-induced impasse that threatens the $14.3 billion deal, sources told Bloomberg.
  • Why it matters

    Why it matters

    Record-high cash levels, together with rising corporate earnings, attractive dividends and declining valuations, should protect equities from a deep and prolonged crash.

  • Facts

    Facts

    • Only 9 percent of professional investors in a German poll said they expected British voters to vote on June 23 to withdraw from the European Union.
    • Germany’s benchmark DAX index is expected to fluctuate widely in the next few quarters, but not to drop below 8,200 points.
    • The relatively high cash positions held by investment funds were last seen in 2012, at the height of the Greek debt crisis, and in 2008, before the Lehman Brothers bankruptcy.
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    Audio

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The stock markets are living up to their reputation of being no place for people with weak nerves.

The DAX, Germany’s benchmark index of the country’s 30 most valuable companies, has lost 10 percent of its value in the last six months, after gaining just as much in the preceding months.

This volatility is more likely to increase than decrease in the months ahead, given political and economic uncertainties such as the U.S. interest rates and presidential elections as well as Britain possibly leaving the European Union.

But worries about a crash, like the one that occurred after the turn of the millennium or when the financial crisis erupted in 2008, seem unfounded.

The possibility of a U.S. interest-rate hike is creating a fair amount of uncertainty. The American central bank, the Federal Reserve, is keeping investors in suspense. For months, Fed President Janet Yellen has kept the markets in the dark over whether the additional steps will soon follow the first rate hike in December.

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