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Despite pressing debt problems, new all-time highs on Wall Street

As Democrats and Republicans in the Senate were unable to agree on a transitional budget, the US is once again in a so-called ‘government shutdown’, which means that civil servants are not being paid and have to stay at home, with the exception of essential emergency services. The main point of contention is spending in the healthcare sector, where Republicans want to make more savings than Democrats, who hope to see Obamacare continue. Now a compromise must be found again. Trump wants to invest USD 1 trillion in defence.

With speculation mounting that the Fed will cut interest rates further due to the expected weak US labour market data, which could not be published on 3 October because of the government shutdown, the indices in the US rose to new all-time highs. On 3 October, the Dow Jones Industrial Index reached the 47,000 mark for the first time intraday, but then corrected back to its initial level at the start of trading. The DAX also rose to a new all-time high of 24,500 index points at the start of trading on 3 October, but then closed lower.

Trump prepares the US for war at home and abroad

Trump recently invited 800 US generals to Virginia to prepare them for an upcoming war, not only abroad but also at home, which led to protests from the Democrats. He wants to take a hard line against Russia and may even send long-range missiles to Ukraine, which the EU would have to pay for, potentially leading to a new escalation. The new Minister of War, Pete Hegseth, rails against ‘fat’ soldiers and has also prepared the generals for war at home and abroad. The first target of war could be Venezuela, allegedly to combat drug traffickers, although in reality it is primarily about oil.

But further attacks against Iran could also be planned, which could lead to Iran blocking the Strait of Hormuz. Then oil prices would likely go through the roof. Whether Trump’s new peace plan can be implemented in Israel/Palestine now depends entirely on Hamas, which is unlikely to surrender its weapons entirely. It is also doubtful whether all the hostages will be released within the next three days, but this would be welcome in order to stop the terrible killings of the civilian population in Palestine.

If Trump’s fundamentally positive plan cannot be implemented, the situation in the Middle East could continue to escalate, with Turkey likely to become more involved, as well as the nuclear power Pakistan, which recently allied itself with Saudi Arabia. Trump’s incomprehensible 180-degree turn in his assessment of the war in Ukraine is not only baffling, but could also lead to further escalation. In his much-noticed speech at the UN recently, Trump described Russia as a ‘paper tiger’ and has now even encouraged Zelensky to launch a counter-offensive to regain all territories in eastern Ukraine, including Crimea, which could even be successful with the support of the EU. He is now even considering sending long-range missiles such as Attacks and Tomahawks to Ukraine, with the EU footing the bill. So he is keeping his distance and cleverly letting the EU pay for everything. But even these serious geopolitical escalation risks do not seem to interest the stock markets at the moment, given the current AI and interest rate cut fever.

Precious metals and cryptocurrencies remain in demand

On 3-4 October, the well-attended commodities fair in Munich took place, where investors in precious metals in particular can rejoice at this year’s sharp rise in precious metal prices. On 1/2 and 3 October, gold reached a new all-time high of USD 3,890/ounce, representing a 42% increase this year. The price of silver also rose sharply to USD 48 per ounce, which is close to the previous all-time high of USD 50. Platinum rose even more this year, with an increase of 56% to over USD 1,600 per tonne. Investors can take advantage of this with the ETC from BNP Paribas. Investors in cryptocurrencies also have reason to be cheerful, as bitcoin is also close to a new all-time high of $122,000.

35 years of German unity = 35 years of Eastern European stock exchanges!

On 3 October, German unity was celebrated for the 35th time with mixed feelings, as the sluggish economy is causing frustration among citizens, as is the reform backlog in politics. Many also cannot understand why Ukraine is to be supported with 100 billion in the medium term when there is a shortage of money here at every turn. Above all, the excessive increase in defence spending is causing annoyance and discontent. As a refuge for dissatisfied citizens, the AFD is therefore currently gaining more and more support and votes.

The enormous expenditure on preparing for war with Russia is also met with incomprehension in some quarters. The sighting of drones at airports in Denmark, Norway and now also in Germany (Munich) has even prompted CDU politician Kieswetter to propose declaring a state of emergency, which would greatly restrict citizens’ civil liberties. After all, a state of emergency is the precursor to martial law! Isn’t this just a scare tactic, especially since it is not certain that the drones were really Russian? Similarly dubious is the alleged airspace violation by a Russian fighter jet over Estonia, because the interpretation of the 12-mile zones is controversial.

What very few people notice and consider, however, is the fact that it was only after the fall of the Berlin Wall and reunification that the first stock exchanges were established in Eastern Europe, which then developed very positively. The war in Ukraine, however, made investments in Russia impossible due to mutual sanctions. The war in Ukraine was now the catalyst for the BRISC Plus countries, which hope for a multipolar world order without the dominance of the USA. Russia is therefore not isolated, but finds many allies in the BRICS Plus countries, which see the war in Ukraine in a completely different light than the West. It is highly regrettable that investors in Russian ADRs/GDRs were not given the opportunity to sell their assets during the war, which is almost tantamount to expropriation.

Whether the frozen Russian currency reserves can be used to give Ukraine €140 billion in loans for reconstruction, as Chancellor Merz wants, is highly controversial under international law. Belgium warns against this, and Macron also does so in principle. Incidentally, it is a sad reflection on Germany that no one from Eastern Europe was invited to speak at the German Unity celebrations. Merz emphasised at the celebration: ‘We are not at war, but we are not at peace either.’ That also speaks volumes. However, he should also have mentioned that without Gorbachev’s consent and the withdrawal of Russian troops from East Germany, German reunification would never have been possible.

Since 1990, the economies of Eastern Europe have repeatedly impressed with above-average growth rates, and the stock markets of these countries have often performed above average. The Warsaw Stock Exchange, in particular, has developed very positively as the largest and most liquid stock exchange in Eastern Europe and now offers a whole range of attractive investment opportunities. Once again this year, 10 stock exchanges from Eastern Europe were among the 30 best-performing stock exchanges in the world, with 6 even outperforming the very well-performing DAX.

The Ljubljana Stock Exchange in Slovenia performed best, with a gain of 46% on the SBI Index, followed by the Prague Stock Exchange with a gain of 40% in euros on the PTX Index. The CECE Index, which includes Czechia, Poland and Hungary, also rose by 36%, while the DAX rose by ‘only’ 21%. The Baltic states also performed very well.

Shares from South-Eastern Europe are booming

The BTX Index for shares from Bulgaria also rose by 22.5% (previous month +24%), and the ROTX Index for shares from Romania also rose by 26% (previous month +22%), significantly outperforming the DAX at 21%. Since March, five Romanian blue chips have been tradable on German stock exchanges for the first time. Romanian shares were featured in a special report in the latest edition of East Stock Trends (www.eaststock.de). Next year, Bulgaria will become the latest Eastern European country to join the eurozone. The share prices of Eastern European banks are performing particularly well. The CROX Index for shares from Croatia has also risen by 19.6% (previous month: 20.8%) since the beginning of the year.

Warsaw Stock Exchange stable despite drone attacks and new tax on banks

Despite Russian drone attacks on Poland, which triggered Article 4 of the NATO Treaty, i.e. consultations, the Warsaw Stock Exchange remained relatively stable. The PTX index declined only slightly. However, even after the correction, the PTX index for Polish shares was still up 33.2% (previous month: 31.4%) since the beginning of the year. The Budapest and Prague stock exchanges also performed similarly well this year. The CTX index for shares from the Czechia rose by 40.5% (previous month: 35.8%) and the HTX index for shares from Hungary rose by 28.9% (previous month: 28.6%), all far outperforming the DAX with +21%. However, the Eastern European stock markets receive very little attention in the media, which is why hardly anyone has them in their portfolio.