Where to spend money on the inventory market? Advice from the JP Morgan knowledgeable | EUROtoday

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Point : How do you clarify that, since November, the markets have been hitting file highs?

Vincent Juvyns: Performance drivers have developed. End of 2023-beginning of 2024, the rise is predicated on the nice efficiency of the American economic system regardless of the brakes utilized by the Fed, on the autumn in inflation – given fears about vitality costs – and on the keenness of traders for tech and the guarantees of synthetic intelligence. It is boosted, lastly, by the prospect of a number of price cuts in 2024. The expectation has actually confirmed to be unrealistic given the delicate, however actual, touchdown of the economic system. But since then, the inventory market has been pushed by firm outcomes, which shocked positively within the fourth quarter, and by the prospect of three price cuts earlier than December, together with one imminent.

Don't you concern that, confronted with American inflation which rebounded to three.4% in February, the Fed will reverse the introduced price reduce?

The first is in reality anticipated in June. It could happen in July, however this delay shouldn’t be interpreted as a damaging sign. We nonetheless anticipate a 0.75% drop in three installments. And we’re satisfied that inflation will proceed to lower, given the slowdown noticed, the drop in vitality costs… Furthermore, the economic system stays properly oriented, supported by consumption: American households are benefiting from a scenario of full employment, a rise in wages greater than inflation, and not hesitate to return into debt.

What can the ECB do, whereas the macroeconomic scenario is extra degraded in Europe?

The ECB is extra towards the wall: decrease progress, unfavorable budgetary scenario, degraded productiveness, tense geopolitical scenario. It may get forward of the Fed. We additionally anticipate three or 4 price cuts by the tip of the yr.

Can the market rise proceed at this tempo?

The development doesn’t appear extreme to us. The macroeconomics, the evolution of income and the speed cuts are fertile floor for additional will increase. In addition, because of the dividends distributed and the repurchases of securities carried out by the teams, the shares ship a excessive return (4% in Europe, 3.5% within the United States), greater than that of the cash market, the livret A or Euro life insurance coverage funds. The reality stays that there could also be revenue taking, particularly since there are as we speak, not like in previous years, quite a few options to shares.

What are they ?

Bond funds, whether or not maturity or open-ended. They have the benefit of being much less correlated to shares than in 2022 and 2023 and thereby regaining their position as a diversification asset. It's not too late to enter.

Can we converse of a bubble given the focus of the rise in shares within the “Magnificent Seven”?

No, as a result of the valuations usually are not exaggerated. In 2000, tech shares have been paid 52 instances two-year outcomes; as we speak, these often known as the “Magnificent Seven” (Google, Amazon, Facebook, Apple, Microsoft, Nvidia and Tesla) are paid 25 instances. This focus of the rise within the markets on tech doesn’t, nevertheless, exclude the seek for different efficiency drivers.

Which ? Which markets and sectors to prioritize?

Emerging markets and China, which has rebounded strongly since February. In the brief time period, we favor the American market, though costlier, to its European counterpart, because of the progress differential and the dynamism of its tech sector. We favor teams uncovered to the vitality transition, those that will profit from synthetic intelligence – significantly in well being – or from good consumption efficiency. We additionally return to Japan, significantly current in semiconductors and robotics §