(CercleFinance.com) – After a year 2022 marked by galloping inflation, a worrying situation in China and a worrying Russian-Ukrainian war, the year 2023 could see some shadows disappear over the finance planet, believes we at IG France.
For the broker, the market is currently in a post-Covid normalization phase, as evidenced by the return of world freight prices to almost normal, with renewed fluidity of transport, linked to the reopening of post-pandemic countries. “75% of global logistics tensions linked to Covid have been corrected”, thus abounds Alexandre Baradez, head of market analysis at IG France, pointing to the break in a curve.
The stock market rally of the last quarter also testifies to this normalization. The rise in equities owes a lot to China’s openness and the decline in risks perceived by operators. On the other hand, the start of the year with a bang leaves the analyst a little more skeptical.
‘Between perceiving less risk and immediately going for the peaks, there is a difference’, underlines the analyst, while that same day, the CAC40 is slowly approaching 7000 points, a level unexplored for twelve months.
According to him, the beginning of the year is marked by this phenomenon ‘FOMO’, or ‘fear of missing out’, the fear of missing something. Some investors would thus have missed out on the 4th quarter rally and intend to take the next train to the peaks.
‘This is an increase that is based more on mimicry than on real membership,’ said the analyst. ‘If the increase in December was justified, that of the beginning of the year seems a bit excessive but the managers have their pockets full of cash…’, he continues.
While inflation in the United States is mainly focused on services, the recent fall in the ISM for services in the United States – from 56.5 to 49.6 – argues for a decline in prices across the Atlantic.
In this context, Alexandre Baradez believes that the Fed is adopting an aggressive rhetoric that cannot last beyond the 1st quarter, when the 5% rate will only be reached in 75bp.
‘It is entirely possible that the Fed will not have much wiggle room left for future hikes, knowing that the rate hikes already embarked on will continue to produce headwinds for the economy with lagged effect’.
The level of rates is already being felt on the mortgage market in the United States, at its lowest since 1994. ‘We don’t borrow anymore, people are waiting for lower rates’, notes the analyst. ‘The Fed will not be able to hold indefinitely with such high rates, it could be dramatic for certain sectors,’ he says, referring in particular to real estate.
The first quarter should therefore see investors juggle between the desire, on the one hand, to welcome the easing of inflation but, on the other hand, the concern about the signs of an economic slowdown which are accumulating on both sides of the Atlantic.
In the meantime, the news is marked today by the opening of the earnings season in the United States, while the next macro figures will be scrutinized closely.
‘That could create a bit of a vulnerable environment, waiting for Chinese macro data to confirm a rebound…and central banks to soften the tone more markedly. This environment therefore seems conducive to consolidation on the equity markets,’ the analyst points out.
For him, economic risks will still weigh on the markets during the first part of the year while the view should be clearer in the second half.
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