CAC 40, Nasdaq, Dow Jones … The stock market remained under pressure this week, inflation and tightening of monetary policies by the Fed and ECB, the flash crash on sterling and Vladimir Putin’s provocations on the front line of the war in Ukraine (hindered gas deliveries, territorial annexations, etc.) which continue to fuel the fears of equity investors. The only favorable wind is the downward correction observed on the long-term rate hike (but beware, the underlying trend remains bullish). The stock Exchange continued to lose ground this week “as economic and geopolitical uncertainties remain significant,” while central banks “have no choice but to quickly raise policy rates to prevent inflation from rising. Federal Finance Gestion.
“Despite some signs of disinflation (energy, food), the service sector continues to raise prices and the labor market remains tense”, observes Schelcher Prince Gestion, for whom “this is the main pressure point on the markets” . The Fed, having increased its hawkish bias (in favor of a more restrictive monetary policy and therefore higher reference rates), the pause in the normalization of monetary policy (long awaited by the markets this summer), “is postponed to more late waiting for convincing signs of a slowdown in the rise in prices and wages ”, underlines the asset manager.
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The euro area will have to continue to cope with high inflation
The services sector, currently the main source of inflation, is struggling to follow the cyclical normalization of commodity prices. “It is the source of all the worries of families who are raising their wage demands to (cope) with this rise in the cost of living,” notes Schelcher Prince Gestion, for whom a favorable change in central bank monetary policy can only to be predicted “if inflationary data decline in a lasting and significant way, or if financial conditions worsen too much”.
While Europe is facing “strong exogenous inflation” and recession prospects “wider than in the United States”, the ECB is forced to accelerate monetary normalization, while “maintaining the size of its balance sheet to avoid excessive recessive shocks ”, points out Schelcher Prince Gestion. Especially since the relative weakness of the euro (which automatically increases the cost of imported goods) keeps inflation in the euro area. The asset manager warns that long-term inflation levels are “likely to be higher” in the future, while many issues (energy independence, demographics, deglobalization or environment, etc.) will sustainably affect prices.
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The Fed and the ECB “straight in the boots”
While central banks have been “very clear that they want to tighten financial conditions (raise interest rates and lower asset prices) in order to slow the economy and thus regain control of inflation”, this inevitably makes feverish markets, “especially at a time when the economy is already slowing down and when political and geopolitical risks are high”, underlines La Banque Postale Asset Management (LBPAM).
Even after the sharp rise in tensions on the equity, rate and foreign exchange markets in September, “the overwhelming majority of members of the Fed, the ECB and the BoE (Bank of England, ed) continue to want to raise their rates quickly, to risk of a severe recession, ”notes the wealth manager, who says he remains very cautious on equities and other risky assets.
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The eurozone is sliding into recession
On the data front, the large decline in European Commission confidence indicators in September suggests that the Eurozone is “sinking into recession towards the fourth quarter, which is consistent with our mild recession scenario this winter,” notes LBPAM. , who adds that confidence “is particularly low for consumers and core countries, which are more exposed to the energy shock”. And in China, the recovery in activity is weak… A bad omen for the trajectory of the global economy.
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Momentum managed to thwart the pitfalls of the stock exchange and to warn its subscribers in time
momentumCapital’s investment letter and dedicated daily newsletter, which helps its subscribers identify the entry (buy) and exit (sell) points on the shares, produced its advances (bullish and bearish) with good results, accurately predicting the probable trajectory of the CAC 40 and warning its readers in time of the impending downfall of several major titles. On the satisfaction side, we then sent out a message of bearish caution and anticipation just before the violent drop in the prices of flagship stocks such as You are here, Bnp ParibasCredit Agricole or even Apple.
We analyzed the prospects of CAC 40 and Wall Street (S&P 500), shares of major French banks (see above), Schneider Electric, BouyguesKering, intersectionDassault Systèmes … And also those of ether (Ethereum), for cryptocurrency enthusiasts.
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