A French Perspective on Market Health

24.05.2017 • United States

Henry Bonner – Strategy and Council Letter (United States) –

No major change today … we remain in conference … we try to rest … and we see old acquaintances …

Here, with our colleagues, we may spend too much time repeating old problems, repeating information that is too vague … Everyone wants to put forward what he thinks … without necessarily making the best use of time …

In any case, we are happy to be in the middle of the French countryside …

Near the castle is a small country village …

Of course, we enjoy being fed and housed … and whitened … without having to lift a finger.

On the other hand, outside, the clouds covered the blue sky of yesterday …

A message about the markets …

We were saying yesterday that an indicator was “red …” Short-term interest rates in the United States have risen in relation to long-term debt … which could signal a recession or an economic slowdown.

Yesterday, the French market nevertheless finished up (the CAC 40 climbed 0.47%) … what analysts attribute to some reassuring statistics …

On the one hand, an index of economic growth, “the flash indicator of purchasing managers,” remained stable in May at 56.8, while analysts predicted a drop to 56.6 …

A little news … but that was enough to give back a little optimism ..

At the same time, the indicator “Ifo” of the business climate in Germany climbed in May …

According to Clemens Füst, director of Ifo, “This evolution of the Ifo index as well as other key economic indicators suggest a growth of 0.6% in the second quarter …”

We said yesterday that markets were waiting for good news to rise higher … and yesterday the markets received this reassurance …

On the other hand, this increase seems to be of short duration …

Today (May 24), we see the Paris stock market down 0.12% … indicating that this slight rebound has not changed the slightly bearish trend since the beginning of the month …

What to do…?

We are still waiting for the market to slow down … we have seen a big surge in the last 6 months (the CAC 40 has climbed by more than 20% in 6 months) … and we should know a more pronounced decline before rising higher …

Of course, we live in strange times … and our governments want to push the actions up …

After deciding to buy back the shares of private companies, the Bank of Japan seems to have managed to produce a rise in its shares …

The Nikkei 225 has climbed one-third since the summer of 2015 … from about 15,000 to 20,000.

If ever our shares on the stock market go down, we should see the intervention of the authorities in Europe …

We will probably have a new economic stimulus program by the ECB, aimed at …

As a reminder, the ECB is already buying bonds from private companies, at the same time buying the debts of the states …

Indirectly, it already allows these companies to issue more debt, which allows them to redeem their shares …

Indirectly, the ECB already supports stock prices … but our directors could easily decide to intervene more directly.

To be continued…

Truly,

Henri Bonner

-Read more at www.lettre-strategie-conseil.com (French)-

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