Volatility has made a big comeback in the stock market since Friday, November 26. This is due to the Omicron variant, but also to persistent fears related to the evolution of inflation and the uncertainties surrounding the timing of the expected tightening of monetary policy in the United States. In this regard, Jerome Powell, head of the Fed, acknowledged that the evolution of inflation reflected a more lasting phenomenon than expected and highlighted a certain lack of visibility for 2022. A sign that risk aversion is rising one notch, the VIX ( US Equity Volatility Barometer) made a foray past 30 this week, which hasn’t happened in a long time.
Unlike US equities, which remain historically expensive today, European equities still offer “attractive valuations (in absolute and relative terms) and strong earnings per share growth (reasonable consensus expectations are + 8% by 2022), while they show a positive trend (surpassing that of the United States) in terms of revisions to EPS (earnings per share) ”, Judge Vincent Manuel, investment director of Indosuez Wealth Management.
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“The quarterly earnings season has been particularly reassuring in this regard, despite the difficulties identified (input cost inflation, supply chain interruptions, new round of closures in certain regions, etc.). In fact, most companies have proven their ability to cope with this volatile environment. The strength of the dollar has also supported equity markets, especially exporters and international companies, ”says the expert. Rising inflation expectations generally favor value sectors (discounted commercial sectors) to the detriment of defensive stocks. Therefore, rising inflationary fears will favor bank stocks and value / cyclical stocks.
This week, Momentum was able to take advantage of market volatility, suggesting excellent time entry (buy) points in stocks and levels conducive to profit taking. The CAC 40 notably ended its fall in the important technical support detected by our analysts, before rebounding strongly … Another reason for satisfaction, our underwriters were able to sell oil and black gold-linked stocks at the highest level of the week, just before the vertical drop (the drop reached as much as 15% at Thursday’s session low, compared to Monday’s high!) in Brent and WTI prices.
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We have measured the outlook for CAC 40 and Wall Street, big stocks like Airbus, Safran, Microsoft (which has already paid off big in a short time to our subscribers) and ArcelorMittal, the major cryptocurrencies (Ethereum and Bitcoin) … Recent events they tend to reinforce our expectations. The only notable disappointment was Orange stock, which returned to its annual low. Next week it could become volatile again and we will continue to provide our subscribers with the best possible support in an environment that has recently become more complex.
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