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The CAC 40 managed to record new zeniths on Tuesday, closing data and session data, with investors showing confidence before the outcome of the Fed meeting this Wednesday. The bullish extension, or at least the absence of consolidation on LVMH which had jumped at the end of last week, played its role as a driving force.
See you at 8:00 p.m. (Paris time) for the FOMC conclusions, and at 8:30 p.m. (especially!) for the traditional press conference.
“The Federal Reserve will undoubtedly put a clear end to hopes of a rapid rate cut soon (March)” warns Emmanuel Auboyneau, Amplegest associate manager. “She will probably emphasize economic resilience and the desire to continue the downward trajectory of inflation. The consensus for a first rate cut should move towards the end of the first half of the year. Jerome Powell will try to calm things down while keeping the door open for future meetings, depending on economic data.”
This FOMC, if in all likelihood it should end with a status quo on the rates themselves, could have a valuable advantage: that of containing clues on the timetable for the decline of the Fed Funds over the year 2024… In any case the Fed is in a particularly comfortable position, with rates at the top and a thriving economy.
“The Fed can boast of having time to act,” appreciates Thomas Giudici, head of bond management at Auris Gestion.
“American growth for the fourth quarter of 2023 thus came out very well above expectations at 3.3% at an annualized rate compared to a forecast of 2%. Given the restrictive context of monetary policy, the American economy is all truly exceptional! Driving growth, household consumption is more than resilient, with even an acceleration in services. Americans have clearly benefited from the increase in their real wages thanks to the ongoing disinflation movement, with PCE inflation increasing from 2.6% to 1.7% on an annual basis over the quarter.”
Should we understand that the downward shift in rates will occur at the very beginning of the second half?
“If the Fed will naturally have to follow the fall in inflation by lowering its rates, the solidity of growth also allows it to take its time. A first rate cut in March is therefore no longer relevant for investors, expectations of a decline being only 49% compared to 89% (only) a month ago…”, continued M Giudici.
In terms of statistics yesterday, the signals were green on the side of a flourishing American economy, the targets having been exceeded on the consumer confidence index (Conference Board) and new job offers (JOLTS).
On the stock side, Renault gained 1.3% after abandoning its IPO plan for its subsidiary Ampere, dedicated to electric vehicles, an operation which was hardly favored by investors. This renunciation is appreciated by analysts this Tuesday. Stellantis ended up 3.8% benefiting from the reassuring publication from General Motors. The Detroit automobile group delivered optimistic outlooks for the current year, after clearly exceeding analysts’ expectations at the end of 2023. On the other hand, at the bottom of the CAC 40 Michelin lost 0.84% while the French group confirmed on Tuesday in a statement to Reuters that it was one of the European tire manufacturers under investigation by the European Commission.
On the other side of the Atlantic, the main equity indices ended Tuesday’s session in disorganized order before the Fed’s verdict, like the Dow Jones (+0.35%) and the Nasdaq Composite ( -0.76%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, ended at levels very close to balance, at 4,925 points. Note that the quarterly copies of Alphabet and Microsoft exceeded the expectations of the financial community.
An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0820. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $77.60.
On the agenda this Wednesday, to follow in priority the ADP firm survey on American employment at 2:15 p.m., the Fed’s monetary policy decision at 8:00 p.m. and the traditional press conference at 8:30 p.m.
KEY GRAPHIC ELEMENTS
The bevel (wedge) which had predominated until then was broken in its momentum by the formation of a large gap and an increase in gains during the session itself on Friday January 26. A major challenge now awaits the CAC: the creation of a series of absolute records. To do this, the participation of the luxury and spirits sectors alone would be insufficient.
FORECAST
Considering the key graphical factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.
We will take care to note that crossing 7695.00 points would revive the buying tension. While a break of 7406.00 points would restart the selling pressure.
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