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Roula Khalaf, editor -in -chief of the FT, selects her favorite stories in this weekly newsletter.
It would be the right time for investors to brake their enthusiasm a little. This year has started with the bulls largely in charge. American actions have already increased by around 4 percent, which makes it one of the first most solid months of opening in the last decade.
Donald Trump’s reinvesting to the President of the United States marked the start of a new period of “animal minds“Among the business leaders, as this week said this week the seasoned investor Stan Druckenmiller. Business leaders are” somewhere between relieved and stunned “by elections, he told CNBC .mode go“said a senior JPMorgan leader at the Davos crowd, while the crypto is about to enter the”banana areaAccording to his boosters. (No, me either. Apparently, that’s good, it indicates that prices are about to increase.)
HSBC maintains good humor. Her multi-active team described this week an “extremely positive” context for risky assets in the first half of this year-a scenario that she described as “golden buckle under steroid”, a mental image rather.
At the risk of spoiling all the pleasure, some market observers – including some optimists – become a little nervous. The first major reason is the global market for state bonds, which has experienced a shocking start to the year. It is not entirely a bad thing: it reflects the continuation of the miracle of American economic growth. But this also reflects the expectation that inflation will persist and that the federal reserve will therefore find it difficult to continue to reduce interest rates – no matter how much Trump wishes. On the sidelines, this also suggests that asset managers require a slightly higher rate of return to supply state funds.
Whatever your favorite speech, the fact is that bond investors were (once again) taken on the wrong foot and that the drop in prices that resulted in (once again) to climb the yields. The most important reference index of all-the American yield at 10 years-is well above 4.5 percent. This has marked a price resumption since mid-January, but remains high enough to undermine the arguments in favor of a reconstruction of stocks.
Like my colleagues reported this weekAmerican shares have now reached their most expensive level compared to the obligations for a generation. It becomes more and more difficult to justify to venture more in the actions while their benefits expected in relation to the profits have hitherto fell below the risk -free rate.
Peter Oppenheimer, chief strategist of global actions at Goldman Sachs, noted this week during an event organized in the chic offices of the bank in London that the shares had so far widely ignored competition from obligations – largely Because optimism around growth was so strong. But this now leaves actions “vulnerable to new increases in yields”.
It is a bit ridiculous, but nevertheless true, that many things depend here on round figures, which constitute psychological indicators useful for investors. The big test would be if the American yields reached 5 percent. At this stage, one of the following two things would happen: the detractors of the obligations would capitulate and conclude good deals to lower yields again, or the sales would intensify and each class of assets would feel pain. My strong intuition is the first.
We are not there yet, but as Lisa Shalett, investment director at Morgan Stanley Wealth Management said this week, “we are always at a critical level”.
“We really get closer to the postal code where slightly slower growth and slightly higher rates become a fatal combination for the markets,” she said. Consequently, she doubts that the shares in general, and the American stock markets very concentrated and strongly dependent on technology in particular, can continue the spectacular progression of the last two years. Shalett expects to gains American actions between 5 and 10 percent this year. This is by no means bad, but it would not constitute a repetition of performance of more than 20 percent recorded in each of the last two years.
Another factor that sounds alarm is the level of optimism itself, especially among private investors. The American Association of Individual Investors reported that the feeling had “soaredIn his last monthly investigation. The expectations according to which the equity prices will increase over the next six months have jumped by some 18 percentage points compared to January, said the AAII.
Even optimistic fortune managers, who advise many of these investors, find it difficult to retain them. Ross Mayfield, investment strategist at Baird Private Wealth Management, told me this week that he believed in the bullish market, while keeping an eye on bond yields, which have evolved “up and right without obvious reason ยป. But he sees anecdotal signs showing that the theme of American exceptionalism is increasingly anchored with its customers. “I’m starting to wonder if you really have to diversify,” he said.
None of this is a reason to run to the hills and take shelter in the safest assets you can find. But things are somewhat scarce at these heights and the risk of slippages from the new American presidential administration is strong. Optimism with glassy eyes rarely ends well, no matter how muscular golden is becoming.