The CAC 40 remained close to its recent peak, despite the incisive remarks of James Bullard, an official of the Fed (central bank of the United States), on the need to raise the key rate to a much higher level. than expected by the markets, in the face of high inflation. “While the idea that key rates will continue to rise, but more gradually, to approach 5% (in the medium term, editor’s note) seems accepted, the idea of a ‘pivot’ (this that is to say a change in the policy of raising the key rate of the Fed, Ed) in 2023 has returned to a gallop”, notes La Banque Postale Asset Management (LBPAM), but “the dialogue between the Fed and the market continues to be difficult”.
“The market seems to think that the monetary authorities will ease the pressure on the economy by easing monetary policy by lowering key rates. A decline of 0.5 percentage point is expected at the end of 2023”, reports the asset manager. Several members of the Fed “have, however, expressed their views on the need to maintain a restrictive policy for a certain time. James Bullard, the president of the Fed of Saint Louis, even indicated yesterday that the key rates could go higher than he had anticipated, that is to say beyond 5%”, underlines LBPAM.
CAC 40: the Paris Stock Exchange surpasses that of London and becomes No. 1 in Europe
At this stage, the conviction of the ‘pivot’ “could still support the equity market, furthermore relying on a more positive sentiment on China (easing of the zero-Covid policy and implementation of support measures for the sector real estate, Editor’s note) and a further decline in the price of oil”, but “it is difficult to see how inflation will be controlled without restrictive financial conditions for a certain time. In this context, a recession, even a moderate one, seems to us the most likely scenario”, warns LBPAM, which thus expects a marked contraction in the profits of listed companies. However, this is not in stock market prices, according to the asset manager, who thus maintains his caution on equities.
LBPAM notes that on important demand statistics, the US economy “remains resilient,” which “complicates” the Fed’s job. Thus, the latest figures on consumption, with retail sales, “show that household spending seems to be breaking with the decelerating trend of previous quarters. Consumption resists. The fact is that the labor market is not showing any noticeable signs of weakening,” the asset manager said.
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Momentum, Capital’s dedicated daily premium newsletter and investment letter, did well this week, with many bullish anticipations on equities (LVMH, EssilorLuxottica, Hermès, Believe, Vilmorin, Ipsos, Métropole Télévision, etc.) materializing or moving in the right direction.
Still on the satisfaction side, we have correctly anticipated the course of the CAC 40 in recent weeks and in recent sessions. And we’ve been rightly cautious on ether and bitcoin.
This week, Momentum analyzed the outlook for the CAC 40 as well as those of many stocks (Stellantis, Sodexo, Liquid Air, Pernod-Ricard, Capgemini, Michelin, Saint-Gobain, Believe, Schneider Electric, etc.), not to mention bitcoin, to cryptocurrency enthusiasts.
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