What's new in the financial markets?
Thierry Masset, Chief Investment Officer reviews the economic and financial news. Every month, he analyses events that have impacted the financial markets. The context of any potential stock market fluctuations is equally scrutinized.
- The global shift away from easy money – 85% of central banks are in tightening mode - and rising borrowing costs, but also the energy crisis in Europe, Covid lockdowns in China, the war in Ukraine and the geopolitics instability have prompted investors to reassess all financial assets, leading to the fastest valuation contractions for bonds and stocks since 2008.
- As US financial conditions are looser than when tightening started, the Federal Reserve will accelerate its efforts to trim its balance sheet. And that is likely to add even more weight to risk assets.
- Risks to the macro environment are thus skewed in favor of value stocks (mainly Energy and Financials), which have historically outpaced growth stocks when inflation peaks and the Fed is engaged in a hiking cycle, and defensives stocks (mainly Healthcare), which, thanks to their lower sensitivity to economic conditions, should continue to outperform the cyclical ones. And, at the regional level, US equities should outperform European ones.
Surge in rates hits every assets
The thinking among investors is that a hawkish-at-all-costs Fed is increasingly determined to engineer tighter financial conditions via lower stock prices and higher bond yields.
Dollar pain spreads from emerging to developed economies
This is the first episode in recent years where serious dollar strength has been more notable against developed-nation currencies as a group than versus emerging economies!
The futur of nuclair power
Natural gas is the hottest commodity in the world right now and rivals oil as the fuel that shapes geopolitics…