Germany’s Shy Smile

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What's going on?

The German economy has had it rough lately, but data out on Wednesday suggests the nation’s firms expect things to brighten up.

What does this mean?

Researchers at the Ifo Institute call around 9,000 German execs every month and ask them a litany of questions about the health of their businesses and their outlook for the future. Those Ifo boffins turn the intel into the Ifo Index, widely seen as Germany’s most important leading economic indicator. And let’s not jinx it, but the latest reading – 86.3, up from 84.5 in October – is actually decent (tweet this). Let’s look deeper: while bosses are still down in the dumps about the here and now, they’re feeling more optimistic about what’s ahead. So it’s not party time just yet, but any good news is welcome right now.

Why should I care?

For you personally: Darkest before dawn.
Economic indicators like the Ifo are an important litmus test for economic health, but it’s not a great idea for stock investors to pay the headlines too much heed. See, markets are typically ahead of the game, meaning most stories are yesterday’s news when they break. Case in point: Germany’s most followed stock index, the Dax, was up more than 20% from its lows even before this better-than-expected news rolled in. “It’s darkest before dawn” might be a well-worn idiom in finance, then, but it’s popular for a reason: canny investors think about what’s to come, not what’s already happening.

For markets: No such thing as a one-way bet.
It looked like the pound was about to join the euro at the dollar-parity party for a while, due to Britains’s cost-of-living crisis and the Federal Reserve’s seemingly endless rate hikes. But news out of the UK and Europe’s brightened of late, and the greenback’s gone into reverse. The lesson: nothing’s a sure bet in investing, and you’d do well to remember it when your savings are on the line.

Originally posted as part of the Finimize daily email.

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