ZEW Expectations Continue to Lag

The ZEW current index continued its slow slog higher in August as expectations backtracked. Expectations are below their historic midpoint as they are higher fully 55.8% of the time, thus lower about 45% of the time. The current index has snaked higher and is higher than its august level only 10.3% of the time making the current assessment quite strong and impressive. Both the current and the expectations indices are up strongly from their year-ago readings.

The index shows the German economy to be quite impressively strong but also reveals some equivocation about the future.

Both stock and bond expectations hover around the middle of the historic assessments made by the ZEW Financial experts. Stock profitability is a positive expectation; however, for bonds, the expectation is negative.

Of course, we will see how much all this changes when markets get a chance to react to the new touted agreement with Greece. The early information on the new deal is lacking. However, as the IMF is reported to be `in' yet, there is no mention of the debt reduction that the IMF board of directors said would have to be a part of any Greek deal if the IMF were going to participate. Questions linger.

So with Greece we continue to take what looks like a step forward but may turn out to be a step back. The German negotiators seem to have lost some of their aggressive edge. And some of the most controversial aspects of the debt deal are not being reported on. Time will tell as the details of the deal will eventually be known and we'll see who in the EMU is on board when the dust clears.