I imagine it’s human: there’s an unhealthy sort of jubilation in seeing illegitimate stars being manhandled, sometimes to their downfall. And the equity markets are no exception. At each start of a stock market correction, the “I told you” clan suddenly swells to support the righters of wrongs, prophets of doom and the usual grumpy people. There are those who knew, those who bring out their old economic models or those who pillory one or so-and-so.
What is problematic in my first sentence is the term “illegitimate”, because it does not have a precise definition. It’s quite the opposite: no one has the same cursor over what is legitimate and what is not. Let’s take an example that comes up often, so often that I have already used it this week: is the Tesla share course legitimate? If you ask investment professionals, some will say yes, some will say no. But with an infinite palette of nuances. There will also be those who find that the course is not really legitimate but who will refrain from saying it because they have invested in it against all their principles. And those who find that ultimately it is deserved but who say it too late each time and who have never taken part in the action. Others will be unable to find economic or rational criteria, but will accept the situation because “it’s like that“or that they perceive a huge unencrypted asset. I spoke of Tesla but without going so far a Hermès is enough. And the answers would not be different.
In short, legitimacy, or illegitimacy, is a concept much too subjective to be defined in the case that interests us: there is no universal civil code in finance (finally, I have perhaps a little too much listened to this podcast on Napoleon this week). All this brings me back to a very good paper published yesterday by the excellent Morgan Housel, in which he quotes investor Jim Grant. “To assume that the value of a stock is determined solely by a company’s profits, discounted by the relevant interest rates and adjusted for the marginal tax rate, is to forget that people have burned witches, went to war on a whim, stood up for Joseph Stalin and believed Orson Welles when he told them on the radio that the Martians had landedIn other words, data isn’t everything, far from it, and context plays a major role. And more than context, says Housel, it’s the story that is being told all around it. This story, if it is convincing, has the power to legitimize what seems illegitimate.
Yesterday, the American markets chained a third consecutive session in the red. And even if the proportions of the ebb were very modest, the initial tendencies of rebound of technological stocks fizzled out. It is in this kind of situation that questions of legitimacy and illegitimacy emerge. For example, is the purge of American cloud stocks deserved because these companies haven’t earned a kopeck yet and are worth billions? Should we be happy that cryptocurrencies are being heckled? Do we have the right to find ludicrous that in a world in a state of climate emergency, investors are flocking to the oil sector? I’ll spare you the rest of the list, because you know her as well as I do and the media and social networks are puffing out examples.
Even if the legitimacy cursor is on the move and the numbers can’t explain everything, serious investors know that applying certain common sense rules can deliver solid long-term performance. This does not prevent slanging, sometimes, with more exotic bets to spice up the portfolios, but remaining within the limits of an acceptable risk, not to say legitimate. This is what has always worked and will continue to work. The rest is just noise.
The noise of the day will be the employment figures for December in the United States. As we know, the Fed has toughened its tone in the face of the economic situation by planning to reduce the available liquidity. Employment is an important marker for central bank decisions, so the 2:30 p.m. release could cause some stir. In the rest of the news, Samsung and STMicroelectronics have pre-announced their performance for the last quarter. There will also be a battery of macroeconomic indicators in Europe this morning. In China, the authorities are urging banks to step up their support for mortgage loans to avoid a wave of bankruptcies in the promotion.
European leading indicators point to a small rebound. In Asia, Tokyo gives up a little ground at the end of the course but Australia and the Chinese places are on the rise.
The economic highlights of the day
The market is essentially waiting for the job market report in December in the United States (2:30 p.m.). Previously, he will have learned in particular about German (8:00 a.m.) and French (8:45 a.m.) industrial production, then European retail sales and inflation (11:00 a.m.).
The euro settles at 1.13 USD. Gold is losing ground to $ 1,795 an ounce. Oil is strengthening, with Brent at $ 82.51 per barrel and WTI at $ 80.03 per barrel. American debt maturing 10 years and bearing interest 1.72% (+1 point). Bitcoin is still nosing under $ 42,000.
The main changes in recommendations
- Belimo: Morgan Stanley raises its price target from 420 to 430 CHF.
- Betsson: Berenberg switches from sell to hold, aiming for SEK 53.
- CD Projekt: Morgan Stanley moves from online weighting to underweighting, targeting PLN 120.
- Centamin: Liberum switches from sell to buy targeting 106 GBp.
- Evolution: Berenberg starts the follow-up to keep by targeting 1130 SEK.
- Evotec: Citigroup resumes neutral tracking targeting EUR 40.
- Ferrovial: JP Morgan goes from overweighting to neutral, targeting 30 EUR.
- Geberit: Jefferies continues to underperform with a price target raised from CHF 532 to CHF 553.
- ITV: Morgan Stanley moves from overweighting to online weighting targeting 110 GBp.
- Kindred: Berenberg switches from keep to buy, aiming for 154 SEK.
- Lanxess: Barclays moves from online weighting to overweighting, targeting EUR 70.
- Next: AlphaValue goes from lightening to accumulating by aiming for 8681 GBp.
- Novartis: UBS remains neutral with a price target raised from 80 to 82 CHF.
- Orsted: Jefferies continues to underperform with a target price reduced from 780 to 680 DKK.
- Saint-Gobain: Jefferies remains to be retained with a price target raised from 64.70 to 66 EUR.
- Sika: Jefferies is still buying with a price target raised from CHF 422 to CHF 441.
- Sthree: Jefferies switches from buy to hold aiming for 500 GBp.
- ThyssenKrupp: Oddo BHF resumes neutral tracking aiming for EUR 12.
In France
Important (and less important) announcements
- STMicroelectronics pre-announces its Q4 results, with higher-than-expected revenues and a margin in the upper range or slightly above targets.
- Ramon Fernandez, Christel Heydemann and Frank Boulben are in the running to replace Stéphane Richard at the helm of Orange, according to Liberation.
- Sanofi establishes a strategic research collaboration with Exscientia.
- AXA issues € 1.25 billion in bonds.
- Electricité de France will close the Hunterston B nuclear power plant in Scotland after 46 years of operation. In addition, the group is extending the shutdown of the Chooz power plant.
- Air France-KLM must raise 1 to 2 billion € this year, according to Les Echos.
- Bureau Veritas acquires Prescience in the United States.
- Appointments to Edenred’s executive committee.
- Altamir sells its shares in Afllelou.
- Deinove obtains a favorable opinion from the DSMB for the continuation of the Phase II clinical trial of DNV3837 in Clostridioid difficile infections.
- Europlasma announces the doubling of a contract.
- Colas obtains a major contract in the United Kingdom.
- A new general manager for Hybrigenics.
- Trigano, LDC, Ecomiam, Osmozis and Obiz have published their accounts.
In the world
Important announcements (and others)
- Samsung’s Q4 earnings are lower than expected.
- The New York Times will acquire the sports site The Athletic for $ 550 million.
- Volkswagen will launch an electric version of its famous hippie minibus.
- GameStop wants to enter the NFT and cryptocurrency markets.
- Wesfarmers will buy API for $ 547 million.
- James Hardie sacks CEO Jack Truong.
- Main results publications : Innolux, Acuity, InPost…
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