After posting its worst April (traditionally the strongest month of the year on average for stocks) in more than 20 years, stock markets have remained turbulent this month, paying tribute to the famous saying “Sell in May and get out” (sell your shares). in May), while bond markets “have failed to play their role of diversification,” notes Natixis Investment Managers, stressing that investors are questioning the economy’s ability to cope with many shocks.
While the week started off favorably for the stock market, the Fed’s inflation and interest rate commentary, as well as the poor distribution sector releases in the US (against a backdrop of undermining confidence, purchasing power… and household consumption) ended up dampening investor enthusiasm. The results of Walmart and Target in the US “disappointed markets both in terms of consumer behavior and margin dynamics,” notes Edmond de Rothschild.
‘Risks to the economy seem to materialize’ stock caution
While consumption is the mainstay of the Western economy, “the fear of a recession has resurfaced,” the financial establishment stresses. Moreover, leading indicators such as Empire Manufacturing and Philadelphia Business Outlook came out below forecasts and at low absolute levels, thus suggesting “future weakness in the American economy,” Edmond de Rothschild points out.
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Faced with headwinds for the economy, China nonetheless took steps to accelerate its growth, which contributed to some stabilization in the stock market in the last half of the week. However, “if technical bounces can occur, medium-term economic risks are likely to materialize,” notes the establishment, which thus claims to remain “cautious about equities.”
Our expectations in the stock market came true
The position is shared by the Momentum team, Capital’s stock market and crypto newsletter, which did well again this week. Indeed, we correctly foresaw a bounce in the first sessions of the week… only to issue a warning (increased downside risk) in the stock market just before one of the worst sessions in two years on Wall Street, on Wednesday May 18th.
Similarly, in recent months, our expectations regarding the stock markets have come true. On March 7, at the height of the turmoil, we indicated (at the most opportune moment) to our subscribers that they were expecting a recovery in stocks, but took a bearish view at the end of March (after an impressive price recovery).
In Momentum this week
This week we assessed the prospects of major stock indices (CAC 40, S&P 500, Euro Stoxx 50) and many stocks: LVMH, Essilor Luxottica, Carrefour, Bigben Interactive, Apple, Amazon, Engie, Saint-Gobain, Bouygues, Boiron, Thales, Voyageurs du Monde… bullish or bearish. For cryptocurrencies, we analyzed Ethereum and paxg (transcripted by Laurent Albi, Next Momentum manager and Afate member). Our caution with CAC 40 heavyweights like LVMH or Ethereum has paid off. Our selection (Engie, Boiron, etc.) performed the best in the French stock market.
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Author’s statement of interest