2023-10-13 06:45:00
Stock market adages die hard. Among them, « sell in may and go away » (“sell in May and look elsewhere”), « buy the rumor » (“gives credence to the rumor”) or even « the october effect ». “The latter is a theory that is based on the idea that serious negative events are likely to occur during the month of October,” explains John Plassard, of Mirabaud Equity Research. Some believe in it as hard as iron: they reduce their stock portfolio or put in place hedging instruments.
In support of their concern: the months of October were often marked by dark days: the financial crisis of 1907, which generated massive withdrawals on the part of savers and a stock market panic leading to the creation of the Reserve federal (Fed); the crisis of 1929 and its “Black Thursday” on October 24, with the placing on the market of 13 million securities that found no buyers and whose prices collapsed. Finally, “Black Monday” of 1987 (October 19), triggered by the rise in interest rates and the announcement of a high deficit in the American trade balance.
Opportunities. Is this enough to panic? ” Curiously, constate John Plassard, It is in September and not October that we find the most bear markets in history. More importantly, the catalysts that triggered the crash of 1929 and the panic of 1907 occurred in September. » Same observation for the declines in 2001 and 2008. “October has historically even heralded the end of bear markets. » And the expert cites the rebounds which followed 1987, 1990 and 2002. “The fact that October is viewed negatively may make it one of the best buying opportunities for contrarians. »
The fact remains that regardless of these sayings, faced with rising rates, the looming recession, soaring energy prices… few managers are positive in the short term §
“Stocks should rebound at the end of 2024”
Le Point: Do you believe in a pronounced decline in the markets between now and the end of the year?
Olivier Raingeard : For six months, the European and emerging markets have been moving without trend, while the American and Japanese markets have been supported respectively by major technology stocks and the weakness of the yen. We believe that the markets could, for the most part, still move without trend over the coming months with ups and downs, due to a gloomy economic context.
Indeed, the four engines that have supported the American economy – excess savings, reliance on credit, low unemployment and expansionary fiscal policy – are gradually dying out. The United States will stagnate in the coming quarters. And with them the global economy. At the same time, inflation will slow further and tend towards 2.5% by mid-2024. The conjunction of the two should encourage central banks to significantly reduce their key rates in the second half of next year to revive activity. The Fed could lower its rate to 3.75%, the ECB to 2.75%.
Should you stay invested?
The valuations of the asset classes call for a balanced and diversified allocation, with a pocket of liquidity to be deployed on opportunities. For stocks, valuations are consistent with a stagnation scenario, but earnings growth expectations for 2024 are too optimistic. Regionally, we favor the American market over Europe. Sector-wise, we are still overweight the technology sector and healthcare, which has underperformed this year. On the other hand, we are underweight consumer discretionary, financials and industrial stocks §
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