Over the past two weeks (Friday March 18-Friday April 1), the stock market has risen slightly in Europe (DJ600NR: + 1.0%) and the United States (S & P500NR: + 1.9%).
Discussions between Russia and the West remain tense with the threat of hydrocarbon supply turmoil, and with the withdrawal of Russian troops from the Kieu region and continued discussions among the fighters as the fighting and bombing in Ukraine continue. Conflict.
The risk of Russia occupying Ukraine as a whole appears to have been largely avoided, but we believe that the schedule and conditions for the suspension of combat remain highly uncertain as the negative effects of the conflict continue to grow. .. Human destruction, large-scale migration, production and trade turmoil, etc.). In this regard, the negative impact on global GDP and Europe is intensifying, boosted by rising inflation (especially energy and food). In addition to this, central bank (especially Fed) statements have strengthened the negative impact of rising interest rates (10-year US: + 23bps to 2.38%, 10-year German: + 19bps to 0.56%). I am. Of China’s containment policy (zero COVID policy).
In this context, we are not happy with the stock market above that level on the eve of Russia’s invasion of Ukraine (DJ600NR: + 1.5%, S & P500NR: + 7.7%, and even + 10.3% in the euro). Not only is the continuation of the conflict increasingly detrimental to the dynamics of the world economy, but it is an illusion to believe that the suspension of combat will lead to the lifting of all sanctions on Russia. The need for Europe to reduce its reliance on Russia’s hydrocarbons and the accelerated energy transition should contribute to permanently high energy prices that weigh on consumption and the outcome of many companies.
Ongoing conflicts and energy prices in Ukraine are expected to remain high over the long term and are currently expected to grow by 2% to 3% in Europe.
Given the growth overhangs associated with 2021, this means that economic growth will remain positive, but in 2022 corporate performance will increase moderately (from 0% to + instead of + 15%). Between 5% e). Expected before the conflict).
Given that after the last four weeks of rebounds, there is still a lot of uncertainty about the consequences of the current economic slowdown and conflict, we believe the stock market offers relatively limited potential in the short term. But inflation and interest rates are upside down.
However, the lack of attractiveness of the bond market (real interest rates are still very low + the risk of rising interest rates) justifies maintaining exposure to the stock market, which holds medium-term potential. We need to be cautious about consumer stocks, more constructive about innovation stocks, and evaluate our ability to sustain growth in the midst of a slowdown despite current rate hikes.
The main upcoming events that may impact the market are:
―――― Evolution of the situation in Ukraine (military, humanitarian, negotiation progress)
-Evolution of sanctions by Western countries / evolution of energy and raw material prices
-The impact of supply chain disruption and inflation on business performance
-Central bank decision (next rate hike in the US is +25 to +50bp)
To Alain du Bruslet, Equity manager, Fund Manager Claresco Avenir-SME-Europe, Kuraraysco Finance Management Committee
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