Stock market: CAC 40, LVMH, Airbus, Renault, L’Oréal, TotalEnergies, bitcoin… this week on Momentum

After 8 weeks of non-stop rallying – a phenomenon that only happens 8 times in 35 years! -, the CAC 40 was held at a high level this week, even posting a new peak since March! Stock market investors continue to hope for a change in the Fed’s monetary policy, which is expected to gradually become less tight, even as market participants’ overzealous enthusiasm casts doubt on many observers. Jerome Powell “should still wonder what he can say on Wednesday for the market, considering that he confirmed a rapid change in the central bank’s trajectory, which has already been included in the forecasts for several weeks”, La notes in this regard. Banque Postale Asset Management (LBPAM).

The fact is that long-term rates in the US fell sharply on Thursday, returning to their previous peak (hence an important technical threshold) of 3.5% last June. This decline in long-term rates has particularly benefited technology and growth stocks, which have traditionally been particularly sensitive to the phenomenon. “It is likely that some investors preferred to keep only the positive statements (from Jerome Powell) to be reassured by confirmation that the pace (rhythm) of future rate hikes will decrease, as well as Jerome Powell’s insistence.” he thought it was always possible to avoid recession,” explains LBPAM.


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Inflation, rates… excessive and premature stock market optimism?

Jerome Powell reiterated that “the Fed is not done raising key rates, and despite some good news on inflation, we are a long way from achieving the objective of price stability,” but stressed the asset manager, who said market confidence was questionable. a possible course change in monetary policy and optimism about the future economic trajectory. While the coming downward correction in both activity and employment should lead to lower inflation, it should also hurt the earnings outlook of listed companies, posing a risk to stock prices.Sotck exchange.

For six weeks, “wide optimism reigns in the stock market. This is based on the fact that, at least in the US, inflation has already peaked, that the nature of inflation is cyclical, that we are moving towards a gradual normalization that will allow us to return to pre-Covid conditions. for both price pressures and interest rates. Markets want to consider a return to normalcy in the near future,” Optigestion notes, adding that this runaway seems “premature and excessive” to it.

The nature of inflation is “like a fluid that spreads and then permeates the economic structure. This continues with the slow contamination of the actors. Many companies have yet to suffer the impact of price increases due to favorable hedges that shelter them in 2022. These hedges will gradually expire in 2023, as many tariffs have yet to be renewed,” the asset manager warns. .


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Listed companies may suffer losses in 2023, shares may return to volatility

Rising interest rates “will inevitably increase the cost of debt, limit investment and worsen balance sheets. The central bank has just started reducing its balance sheet. Its effects will not go unharmed!” – warns Optigestion, for which it is better to wait to measure the impact of the spread of inflation and rising rates.

So far, the results posted by listed companies have been quite good and reassuring, with many multinationals clearly taking advantage. pricing power (the ability to pass on additional costs to customers in sales prices). Third quarter accounts “still reflect a positive price impact. Well-advised companies were able to adapt quickly. But a negative and more damaging volume effect must follow. Repeated price hikes will soon face greater resistance and affect margins,” warns Optigestion, for whom declining consumer purchasing power will lead to lower demand, while an expected rise in unemployment should contribute to a worsening social climate.


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China is gradually relaxing its zero Covid policy, our luxury giants are taking advantage

On the good news side, while China is showing signs of weakness on the economic front, it is gradually weakening in its fight against Covid-19. “It’s more or less official, the zero-tolerance policy as we know it is over,” says LBPAM. This is what we can understand from Chinese Vice Premier Sun Chunlan’s announcement that the fight against Covid has entered a “new phase”. In particular, he insisted that the new variant was less lethal and therefore less dangerous.

Thus, “everything will be done to calm the ongoing protests by introducing real relaxations related to arrests in the coming weeks,” said LBPAM, “this will be gradual, because the strong increase in infections also makes it difficult to go” quickly with one of the most fragile and poorly protected populations in terms of vaccination . Relaxations in Beijing’s zero-Covid policy should support China’s struggling economy. Hopes for China have particularly benefited French luxury giants (LVMH, Kering, Hermès, etc.) who have considerable exposure to Chinese consumers.

Momentum goes out of play

Momentum, Capital’s premium stock market investment letter and newsletter, performed well overall this week. Although the CAC 40 has not seen any significant changes over the past 5 days, many stocks in our selection (LVMH, Hermès, L’Oréal, Prodways, Kering, EssilorLuxottica, TFF, etc.) have performed well. The game.

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This week, Momentum analyzed the outlook (up or down) of the CAC 40 and many stocks (LVMH, Renault, Veolia, Kering, Airbus, Alstom, TotalEnergies, Remy Cointreau, etc.), apart from bitcoin, for cryptocurrency enthusiasts.

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