While the number of people infected and killed by the coronavirus grows, the financial markets have rediscovered their vitality amid the positive results coming out of the United States (in the technology sector in particular), but also due to the dynamism of mergers and acquisitions activity. Despite a more challenging climate, merger and acquisition operations continue to thrive on the market. Worldline and Ingenico have announced their merger, creating the European market leader in payment services.
Having been closed for a week for New Year, the Chinese equity markets reopened at around -8%, but this did not prevent a resurgence of investor confidence. China’s isolation, which will be a setback to the industrial recovery that was taking shape (and the European recovery, too) no longer seems to be causing alarm. Indeed, the Bank of China announced a cash injection of more than €150 billion. However, the sharp rise in corporate bankruptcies over recent years is worrying the powers-that-be. Donald Trump was not impeached (as expected) and the Democrats had great difficulty keeping their composure at the surprise winners of their first caucus in Iowa (Bernie Sanders and Pete Buttitieg). One by one, risks are dissipating for investors, whose instincts are, nevertheless, somewhat schizophrenic. Interest rates have fallen, gold is still at around $1,560-$1,570 per ounce and the “ami dollar” has dipped below the 1.10 threshold against the euro. These are considered to be safe haven assets. The results put out by major French companies are good (BNP, Natixis, Total, Vinci, Publicis, etc). These explain a fairly sharp rebound of some securities that had been lagging behind considerably. The strategists are no longer talking about the end of the economic cycle. On the markets, euphoria looms under the TINA principle; There Is No Alternative to stocks.
It would, in fact, be difficult not to advise buying stocks (especially those paying generous dividends or which are not too expensive) at a time when money is so cheap and the macro-economy is in relatively good health. But since the focus has been on China with the trade agreement negotiations in 2019 and with coronavirus in 2020, let’s take a look at its astrology. 2020 is the year of the Rat (the metal rat, but we’re not talking here about the finer points of the signs of the zodiac). Rats are reputed to be good at saving, but they also act impulsively. It is interesting to note that in recent times, the last year of the Rat was…2008 and also that this week has seen the most significant outflows on European equities (-$3.8 billion).
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in February 7/th, 2020.
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