If an alien investor descended on earth and examined the dynamics of the S&P 500 stock index this year, he would not be able to understand the fact that it has risen by almost 20%. In fact, for almost two years the majority of analyzes by experts at a global level have indicated an imminent economic recession induced by the marked increase in the cost of money decided by central banks to combat inflation. <\/p>\n\n\n\n
Instead, this year the US economy is growing at a real rate close to 3%, the Europe at an estimated rate of 1.3% despite the technical recession in Germany and China remains close to 5% GDP growth, modest compared to previous years, but far from an economic crisis. There are various explanations to understand the recent dynamics of stock markets, not only in the United States, which derive from a common denominator, the level of liquidity present in individual financial systems. The higher it is, the greater the risk appetite of investors who therefore turn towards equity investments. In practice, the virtuous cycle initially sees an increase in systemic liquidity followed by an appreciation of share values and therefore an improvement in the economic trend. In fact, the stock market is a discount mechanism for future economic growth, therefore its dynamics precedes and does not follow fundamentals. Suffice it to say that one of the components of the super index precursor of the US economy is the S&P 500 index. The stock market in 2023 is telling us that there are no recessionary fears in the short-term and this explains its gradual appreciation starting from October 2022. <\/p>\n\n\n\n
It is no coincidence that it is precisely from that date that the central banks changed their monetary policy from restrictive to expansive, very gradually and even in alternating phases, however this new cycle of credit easing seems destined to continue, if the past is an indication, until well into 2025. Another explanation for the incorrect economic consensus of the last two years lies in the misunderstanding relating to the slope of the bond yield curves both in Euros and in Dollars, which have gradually become very negative apparently due to the marked increase in short-term rates decided by the monetary authorities, but in reality, due to the marked weakening of the duration premium inherent in long-term yields. This negative component of the rate at the beginning of the year deducted as much as 150 basis points in the case of ten-year government bonds in dollars, distorting the curve which would usually indicate a forthcoming economic cooling, but which without this anomaly would have been substantially flat, therefore neutral in the cyclical sense. In fact, since the beginning of the summer the duration premium has been constantly increasing, always in relation to inflationary forecasts, leading the US 10-year bond to yield 5%, therefore almost flattening the curve. The recent monthly data on trend inflation on the opposite sides of the Atlantic positively change the outlook for the securities markets, in the sense that the objective of 2% inflation excluding energy and food could be reached, already in mid-2024. If this were the case, we could see reductions in the cost of money within the next year. <\/p>\n\n\n\n
This novelty explains the decline in the ten-year yield in dollars from 5% to 4.5%, even if the long term does not present a particular potential for capital appreciation, as the strong need for financing not only of the US government, allows us to predict significant reductions in consolidated returns. In this context we can also insert the dollar which has entered a temporary corrective phase which has seen both the supports at 1.06 and 1.09 against the euro violated, but which could regain strength in the New Year, thanks to the combination of an accommodating fiscal policy , less and less mitigated by the FED, which attracts foreign capital and by the strong increase in private sector liquidity, favored by the recovery of the profit margins of American companies. Stretching the thesis, if the greenback were to strengthen again, the disinflationary effect on the economy could induce the Fed to reduce the cost of money earlier than expected, with a further positive effect for the stock market, where cyclical and financial stocks are favored. Meanwhile, from a technical point of view, the S&P 500 index is overbought, oriented towards closing the year at current levels, while the last opportunity in this cycle for a correction is in the first quarter of 2024, but only in the event of negative surprises regarding the economic situation and inflation, which now seem quite remote.<\/p>\n\n\n\n
Nicola Bravetti Data Source: Bloomberg<\/em><\/p>\n\n\n\n \u201cThis report cannot \u2013 nor can \u2013 be consider a solicitation to invest in financial instruments\u201d<\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":" If an alien investor descended on earth and examined the dynamics of the S&P 500 stock index this year, he would not be able to understand the fact that it has risen by almost 20%. In fact, for almost two years the majority of analyzes by experts at a global level have indicated an imminent economic recession induced by the marked increase in the cost of money decided by central banks to combat inflation. <\/p>\n","protected":false},"author":1,"featured_media":5791,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,39],"tags":[17,15,21,16,18],"class_list":["post-5808","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markobs","category-observer-2023","tag-bravoadvisory","tag-market","tag-market-observer-bravoadvisory-switzerland-ticino-svizzera","tag-observer","tag-switzerland"],"_links":{"self":[{"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/posts\/5808","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5808"}],"version-history":[{"count":1,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/posts\/5808\/revisions"}],"predecessor-version":[{"id":5809,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/posts\/5808\/revisions\/5809"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=\/wp\/v2\/media\/5791"}],"wp:attachment":[{"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5808"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5808"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bravettinicola.ch\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5808"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}