The summer holidays have arrived but the activity continues and the crisis continues its work. Covid-19, unemployment, American presidential election, monetary policies … Jean-Paul Betbeze lists and analyzes the various events and indicators to take into account in order to understand and anticipate the reaction of the financial markets between the start of the school year.
Of course, you know, the financial markets are never on vacation. But you may have the right to take a step back. In order not to be obliged to follow what is happening day by day, here is a list of indicators to follow to know, roughly, what is happening in our strange world.
1) 61,067 July 9: the number of new cases of people affected by Covid-19 in the United States. This figure, which was around 20,000 per day in mid-June, rose with the bumpy turmoil in the country. Everyone thinks of Doctor Fauci’s apocalyptic forecast: 100,000! If the current figure increases further, it will be perceived as an announcer of reconfigurations and the American stock markets will fall. And the others ?
2 ) 50% for Biden, 40% Trump in recent days. The polls for the November American elections will be more and more watched. The markets read more and more clearly the promises of Joe Biden and fear more taxes on companies and the richest. They then search for information on its official site, but find nothing! They will only see lists of new expenses. Talking about taxes is a waste, but wanting to spend that much and not talking about it can also be confusing.
3) 1,807 dollars for an ounce of gold (28.4 grams), the indicator of global anxiety has increased by 19% since January, but since interest rates are zero, it costs nothing to stock!
4) 3.383 and + 11%: these are the Shanghai index and its rise since January. Certainly the global indicators of industrial and service recovery, the famous PMI (purchasing indicators) are useful. We will look at them for the United States, the euro zone and especially for China. The financial markets have in fact said that the recovery is the strongest. The Shanghai Stock Exchange index then becomes a good sign for the Chinese markets of course, but is now seen as a leading global indicator – even if Donald Trump threatens.
5) 4,943, -17.5% since January. This is the Cac 40, better than its low point at 3,780 on March 18, a sign that does not deceive the effects of quantitative easing led by the ECB! Even if French public loans already exceed what was borrowed in total last year, their average cost is still negative: -0.14%. These are signs of confidence if you want, support for sure. Today in France, there is a stronger improvement than expected, let us hope that this continues. But it is not clear that this is enough for Cac 40 members under pressure, such as banks, insurance companies and oil.
6) -0.14%: this is the yield on the 10-year French treasury bill, still negative. We can compare it to -0.48% German: you have to pay more to be more protected. We can especially compare it to + 1.29% Italian: we must accept to take risks to finance this country in recession (like all of them for that matter) and especially in deflation (-0.2%), knowing that the ECB is still there (even more and more) to buy treasury bonds, and that the Union is launching a massive support program, from which this country should benefit. In short, investors are worried or frugal.
7) The indicators of employment and then of inflation will be everywhere to follow: employment to illustrate the strength of the recovery, especially in services, then inflation, to measure to what extent the risks of deflation will be averted.
8) 10,748 points: NASDAQ has gained 21% since January. This is the best illustration of the changes that have taken place in consumption patterns, with direct purchases and home deliveries and in production modes, with more robots and artificial intelligence, in other words from GAFAM.
9) Fed, BCE, BOJ, BOE, BoC: of course, we will have to listen to what the big central banks say. Beyond vaccines, a New World is emerging, with shorter and safer production chains, better connected and more demanding consumers. It will involve more investment and training, therefore more competition and credit, therefore more vigilance … and stock market action!