Market volatility and nervousness: opportunities to be seized

Nervousness conquers the financial markets. After a bumper year in 2021 – the CAC 40, Dow Jones and Nasdaq jumped 29%, 19% and 22% respectively – the 2022 vintage looks far less promising. Between January 1 and February 4, 2022, while the Paris stock exchange limited the damage by yielding only 2.8%, the Nasdaq in the meantime fell by 10%.

It must be said that after a decade of reasonable inflation below 2% and particularly low interest rates – thanks to an accommodative monetary policy implemented by the European (ECB) and American (Fed) central banks – inflation is making a comeback. . Thus, last year it reached 6% in the United States, unheard of since 1982! In Europe, if the progression is not so brutal, it is significant with an average of 4.6% in the last quarter of 2021 for all 19 eurozone countries.

“Central banks are gradually putting an end to their policy of unconditional monetary support. This situation could not last longer because they now have astronomical amounts of financial assets on their balance sheets and the states are heavily indebted”, analyzes Pierre Carpentier, director of management. of Double Transatlantique Gestion. In less than two years, the American federal deficit has exploded and multiplied by 4, to reach 3.2 trillion dollars in 2020. A situation that could only favor the return of inflation “.

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Not to mention the production chains, in particular in China and Taiwan, seriously upset by the “zero Covid” strategy, and which are unable to respond to the strong recovery in world consumption of capital goods.

“To fight inflation, central banks will have to raise their key rates, notes Olivier Cornuot, director of collective management at Matignon Finances. The market expects five rate hikes from the Fed in the year and the ECB Now also predicts We are at a tipping point and, since November, the markets have been arbitrating. They are moving away from very expensive and unprofitable growth stocks, such as some green economy stocks, biotech, unprofitable tech stocks. ”

Not all is bad

However, not all is bad. “The growth is there and both the United States and Europe are seeing their unemployment rate drop significantly. Big companies have reduced their debt and have significant liquidity, says Pierre Carpentier. Thus, in late September. 2019 and late September 2021, the amount of liquidity accumulated by companies listed on the S&P 500 increased from $ 1.6 trillion to $ 2.4 trillion.

It therefore seems wise to invest in low debt groups, generating liquidity in an inflationary environment. “We must favor companies that are able to pass on the increase in the price of their products or services to their customers or to offset this increase with productivity gains, believes Olivier Cornuot. Such as the luxury, semiconductor, automotive sectors. , construction, oil and banking. ”

The current volatility of the stock market also offers real opportunities for long-term investors. “In the short term, markets sometimes overreact. Currently, growing stocks like US tech are generally mistreated with, for some of them, stock market price drops of more than 50% in two months. By not throwing out all the babies with bath water, notes Guillaume Eyssette, associate director of Gefinéo, solid financial prospects. In the medium term, they can offer good stock market performance. ”

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The express

Infographic

Infographic

Dario Ingiusto / L’Express


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