After posting their worst April (traditionally the strongest month of the year, on average, for equities) in more than 20 years, equity markets remained turbulent this month, giving credit the famous adage “Sell in may and go away” (sell your shares in May), while the bond markets “have failed to play their role of diversification”, observes Natixis Investment Managers, who stresses that investors call into question the ability of economies to cope with the many shocks.
While the week had started auspiciously for the stock market, the Fed’s remarks on inflation and interest rates as well as the poor publications of the distribution sector in the United States (against a background of erosion of confidence, purchasing power… and household consumption) ended up dampening investor enthusiasm. The results of Walmart and Target in the United States “disappointed the markets, both in terms of consumer behavior and the evolution of margins”, notes Edmond de Rothschild.
“Risks to the economy seem to be materializing”, caution on equities
While consumption is the main pillar of Western economies, “the fear of a recession has resurfaced”, underlines the financial establishment. Especially since the leading indicators, such as the Empire Manufacturing and the Philadelphia Business Outlook, came out below forecasts and at low absolute levels, thus suggesting “a future weakness of the American economy”, indicates Edmond de Rothschild .
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Faced with headwinds on the economy, China nevertheless took measures to boost its growth, which contributed to a certain stabilization of the stock market in the last part of the week. However, “if technical rebounds can occur, the medium-term economic risks seem to materialize”, notes the establishment, which says thus maintaining “a cautious attitude on equities”.
Our anticipations on the stock market have materialized
A position shared by the Momentum team, Capital’s newsletter on the stock market and cryptocurrencies, which once again did well this week. Indeed, we had correctly anticipated the rebound in the first sessions of the week… to then issue a message of caution (the downside risk increasing) on the stock market just before one of the worst sessions in two years on Wall Street, on Wednesday May 18.
Likewise, in recent months, our anticipations on the equity markets have materialized. On March 7, in the midst of the turmoil, we had indicated (with excellent timing) to our subscribers to expect a rebound in equities, only to adopt a bearish view at the end of March (after a spectacular rebound in prices).
On the Momentum program this week
This week, we gauged the outlook for the main equity indices (CAC 40, S&P 500, Euro Stoxx 50) and many stocks: LVMH, EssilorLuxottica, Carrefour, Bigben Interactive, Apple, Amazon, Engie, Saint-Gobain, Bouygues, Boiron , Thales, Voyageurs du Monde… with bullish or bearish expectations. On the cryptocurrency front, we delivered our analyzes on Ethereum and paxg (a decryption by Laurent Albie, manager of Next Momentum and member of Afate). Our caution on CAC 40 heavyweights like LVMH or on ether has paid off. Our selection (Engie, Boiron, etc.) outperformed the French equity market.
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Author’s declaration of interests