Equity investors are still not out of the rut after several difficult months. On the Paris Stock Exchange, the CAC 40 had a bad week… and a first half with a historic drop in stocks and bonds. Despite the recent decline in long-term rates, “we experienced a second successive quarter where the prices of the two major classes of liquid assets, bonds and equities, fell,” said La Banque Postale Asset Management (LBPAM).
A historical phenomenon: we only experienced such an evolution in 2008. “The important question today is what about the future? In fact, market momentum clearly seems to have turned in recent weeks. Indeed, the recent trend is dominated by growing concern over the possibility of a recession in the coming quarters. Thus, risky assets (equities, etc.) suffer this negative effect”, explains the asset manager, who considers in this respect that the risks of a recession “have increased sharply”.
CAC 40, Nasdaq… the specter of a historic crash: the stock market council
Especially since the latest consumption figures in the United States were much worse than expected, which is “a bad omen for activity”, underlines LBPAM, which notes that the concern “is strong on the impact of the acceleration of inflation on the behavior of households”, while their level of confidence is historically low.
In fact, in addition to the disappointing inflation figures, the various studies on the morale of American households “have drawn up a worrying observation (morale at its lowest since the 1980s), with above all long-term inflation expectations (which change ). Clearly, US households are in the process of resigning themselves to lasting inflation (5-year expectations). And it is indeed this reason that prompted the Fed to reinforce its restrictive rhetoric by indicating that it is now ready to accept the collateral effects of its monetary tightening, even if it means taking the risk of an abrupt slowdown in the economy”, underlines Vega IM.
A recession in 2023 is gradually becoming a consensus scenario. According to a recent survey by the Financial Times, 70% of economists surveyed “expect the US economy to go into recession in 2023”. And according to the recent Bank of America Merrill Lynch survey of the financial community, managers’ optimism on growth is at an all-time low, while most macroeconomic data “argue for a stronger slowdown than expected a while ago. a few months”, adds the asset manager.
In this context and while the trajectory of long-term rates remains uncertain, “caution must prevail regarding exposure to risky assets, with an emphasis on greater selectivity in the choice of stocks to be kept in the portfolio”, judges the asset manager, for whom “keeping a defensive position always seems to be the most appropriate”.
Economy, stock market… heavy warnings from Goldman Sachs and JPMorgan
A position shared by Momentum, Capital’s stock market and premium cryptocurrencies newsletter. Once again this week, many of our expectations (Capgemini, Thales, Neoen, Schneider Electric, BNP Paribas, Société Générale, etc.) have materialized. In particular, the support and resistance levels (technical analysis) on the CAC 40 have been correctly identified… and the recent dusting of the flagship Parisian index did not surprise us. Our cautious approach and stock selectivity have benefited our subscribers…
This week, we gauged the outlook for the CAC 40, Nasdaq, Google, ArcelorMittal, Eurofins, Thales, Euroapi, LVMH, Dassault Aviation, Stellantis and other stocks, with bullish or bearish expectations. We have indicated the sectors to favor and those to avoid. On the cryptocurrency front, we analyzed bitcoin, as well as the potential of the storj token (a decryption by Laurent Albie, manager of Next Momentum and member of Afate).
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Author’s declaration of interests