Sell ??in May and leave? Quite the opposite! The old saying of the stock markets of getting rid of securities with the arrival of spring is not being fulfilled. This month may even be the best of the year.
The stock markets are fuming despite the threats of nuclear war that hover over the situation. Wall Street, which has been rising for four consecutive weeks, has broken another barrier these days. Never before in history had the Dow Jones index reached 40,000 points. And in record times: during the epicenter of the pandemic in 2020 it fell below 19,000.
And he is in good company: the German Dax is flirting with all-time highs even though the German economy is stagnant. And the Spanish stock market, beyond the political turmoil and anger, is already at its highest level since 2015. Likewise, risk premiums in Europe are not moving, even with interest rates that continue to be at their highest since 2015. birth of the euro.
In the United States, the decoupling between the price of money and stock market returns is even more evident: just think that today the S index
“Think about how many people were talking about recessions and bear markets all last year, and now we’re hitting new highs again,” Ryan Detrick of Carson Group laughed on Bloomberg.
How is this resilience explained? As is often the case in these cases, there is no single factor. Xavier Brun, director of equities at Trea Asset Management and adjunct professor at UPF, sums it up this way: “we are experiencing the last chapter of Covid.”
Yes, although the pandemic broke out four years ago, this expert explains that the economy is still under the consequences of the so-called “bullwhip effect”, that is, the shocks of the collapse in demand in 2020.
Indeed, for a long period, faced with the drop in consumption and confinements, companies were forced to accumulate inventories. The breakdown of supply chains caused inflation. Over time, as the economy got back on track, companies were able to get rid of inventory.
And it is now, explains Xavier Brun, years later, when firms begin to sell new products, swelling their balance sheets and offering good results. The companies of the S
Likewise, the labor market is robust (and even lacking labor in certain sectors). Both the United States and the eurozone have an unemployment rate close to historical lows (less than 4% and just over 6%, respectively), a sign that consumption still has a way to go beyond the post-covid rebound.
Then we must discount the appearance of artificial intelligence, which has attracted capital to technological stocks in a way that has not been seen since the beginning of this century (in one year, Nvidia’s value has risen 100%).
And, ultimately, the forecasts of a drop in interest rates, which the markets are already discounting. Although they are lower than initially thought, the slight reduction in inflation in April in the US (to 3.4%) means that this moment is increasingly closer (seven out of ten analysts say so). expected in September). In turn, on June 6 the European Central Bank should opt for its first reduction.
And geopolitics? Does not count? “The data says that it has less and less effect on the markets. Since the attacks on the Twin Towers in 2001, its impacts have become less and less,” concludes Brun. As Bob Moritz, CEO of PWC, said, “politics matters relatively to me. I’m only interested in what the Federal Reserve does.”
