Market: no need for breathing space

( – The Paris Stock Exchange should open slightly higher on Monday morning, with the market maintaining its upward course after having had a strong start to the year.

Around 8:15 a.m., the ‘future’ contract on the CAC 40 index – January delivery – advanced 21.5 points to 6886 points, announcing a continuation of recent buyback movements in early trading.

The benchmark had ended Friday’s session with a gain of almost 1.5% to 6,860 points, confirming its start to the 2023 financial year with a bang, which translated into an impressive weekly gain of 5.3%. since January 1.

Wall Street also had a successful start to the year, with weekly gains of more than 1%, largely driven by employment numbers that showed easing wage pressures.

Investors know that the next few weeks will prove decisive, with the first month of the year generally setting the overall trend in equity markets.

According to calculations by S&P Dow Jones Indices, when the S&P 500 index rises in January, it is up over the full year in more than 71% of cases.

The theorem was largely verified last year, since the S&P fell by 5% in the first month of the year before ending the 2022 financial year down just over 19%.

Similarly, analysts point out that it is extremely rare for a year of stock market correction to be followed by a new year in the red, which makes strategists predict a rather favorable stock market year in 2023.

For analysts at Danske Bank, the year promises to be ‘interesting’ in view of the contradictory forces currently tormenting the financial markets.

“The easing of inflation, the slight improvement in visibility, the reopening of the Chinese economy and the idle liquidity are all elements likely to reduce the risk premium and support equities”, they assure in their last weekly point.

‘Conversely, the prospect of a recession, the still restrictive policy pursued by central banks and the pressures exerted on corporate profits still militate in favor of a cautious positioning’, however tempers the Danish bank .

At the American asset manager Raymond James, we also predict a rise in the stock markets in 2023, while predicting a path ‘strewn with pitfalls’ in the months to come.

“Volatility is likely to persist and bottoming out before markets recover is likely to take time in the current environment,” warns Mike Gibbs, director of its equity portfolio and strategy. technical.

‘In this state of mind, we recommend that investors be patient and pragmatic, that is to say, to use the bouts of weakness to strengthen themselves (from a long-term perspective) and not to chase taking into account the rallies that could arise”, he specifies.

A certain excitement could emerge in the coming days, until the big meeting of the week on the American side, that is to say the monthly consumer price statistics (CPI) scheduled for Thursday.

Investors are hoping for a further slowdown in inflation in the United States, which had reached 7.1% in November, its lowest level in almost a year.

Moreover, spreads could remain low for much of the week as investors wait for the start of Q4 earnings releases.

Investors should favor a ‘wait-and-see’ approach before the publications of Bank of America, Citi and Wells Fargo, which will open the ball of the results of the big American banks on Friday.

In Europe, the session will be marked by unemployment figures in the euro zone, which will be released at the end of the morning.

In Germany, industrial production rebounded slightly by 0.2% month-on-month in November, led by consumer goods after its 0.4% decline in October, according to data from Destatis, the ‘Federal Statistics Bureau.

At this stage, a breathing exercise could nevertheless seem welcome after an almost non-stop climb since New Year’s Eve.

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