The Dow Jones suffered its ninth consecutive session of decline while Powell is expected to announce a new rate cut in a few hours. We can ask ourselves questions about what is happening. Not to mention that during this time, very discreetly, Nvidia is playing dangerously with the “correction zone”. The star of AI and the year is bringing it (the year) to a close in the worst possible way. At the lowest point of the session, Nvidia lost 17% since the highs of November. Yet everyone is confident, cash levels are at their lowest and everyone is “RISK-ON” for Christmas. Could there be a stone in the shoe?
Conviction and doubt that challenge each other
If we take the case of the Dow Jones, there is nothing to roll over on the ground either, but we must still remember that United Healthcare has lost almost more than 10% since the assassination of Brian Thompson by insurance’s new Robin Hood, and UNH faced bipartisan efforts in Congress to dismantle insurers’ lucrative pharmacy benefits management businesses. In short, bad times for UNH, you add to that Nvidia which weighs, without forgetting the oil companies which no longer succeed since oil no longer wants to rise and since it no longer worries about the situation in the Middle East.
So yes, we know that the Dow Jones is not THE main AXIS of the world stock markets, it is too narrow, with its 30 members, to have any weight in the scale, but let’s say that psychologically – especially when we sees that last night he finished his session BELOW the 50-day moving average, we can still wonder if something is happening that we have not yet completely interpreted and integrated. Meanwhile, the S&P500 is consolidating at high altitude and the Nasdaq is practically at an all-time high. Seen from this angle, we can simply say that it is a question of preferences and that at the moment, investors, stakeholders and traders are more focused on other values. We have recently seen a growing interest in stocks like Broadcom and Marvell, which is causing some Dow stocks to lose some interest. However, some gloomy minds will tell you that this perhaps hides another problem that we do not want to see. The fact that doubt is creeping into the minds of investors about next year’s scenario, a few hours before the FED’s publication on interest rates.
What if the FED?
So this evening the FED will speak. They will announce a 0.25% reduction in rates. Any other possibility would be ultra-shocking. The market is not worried about this, on this side, the FED should continue to be our friend. At least for the moment. Where things will start to get stuck is that more and more “experts” are wondering if there is a real reason to continue lowering rates and if the economic situation that is developing to develop could make tonight’s decline the last for quite a while.
With the ECB virtually announcing rate cuts for the entire coming year, the FED might be wondering if this is a good idea. A few weeks ago, Powell had already declared that there was NO EMERGENCY in wanting to lower rates too quickly and that there was mainly no fire in the lake. Except that at the time of this speech, we did not know the state of inflation which recently showed us that it was dangerously rising again and we do not even know what the PCE will announce to us on Friday. However, what we now know is that retail sales were stronger than expected yesterday. A figure which is a good sign for the economy, but a bad omen for inflation. This evening’s rate cut is therefore almost complete, but the risk of seeing Powell take a slightly more “Hawkish” tone can frankly no longer be ruled out. This is perhaps why the Dow Jones has been showing signs of weakness in recent days. Future history will tell. One thing is certain, we are starting to doubt the FED’s strategy in 2025 and we know that the markets don’t like to doubt too much and what’s more, they don’t like not knowing…
The Europe that no one understands anymore
While the Americans were waiting for the FED and will wait a little longer today, Europe was experiencing a day of wait-and-see, because we are not the type to want to take risks without knowing what is going to happen this evening. But two or three interesting things still happened in Europe, starting with the German economic figures. While Olaf Scholz will begin his year 2025 by going unemployed, the IFO is completely at the bottom of the hole – demonstrating once again, if necessary, that the German economy is bloodless and that nothing is going well more. Yet, to everyone’s surprise, ZEW demonstrated some form of economic enthusiasm for next year. A bit as if we were saying to ourselves that “since it can’t get any worse” we might as well see what could improve. Yesterday the DAX ended down 0.33%, but the session was described as “high altitude consolidation”, a term that would have made a French academic with economic training die laughing, since the DAX has not represented a long time. the German economy and no one knows what it really represents anymore.
The Bank of France lowered its growth forecast for 2025 and its boss warned of “political discord” in the country. Growth forecast for 2025 is now 0.9% compared to 1.2% previously. French GDP growth should not exceed 0.2% in the first and second quarters of 2025, according to INSEE which continues to forecast zero growth in the fourth quarter of this year. Yet with a guy like Bayrou as Prime Minister, who takes Falcon 7s to go to his municipal council in PAU (even though no one knows where it is on the map of France) and who campaigns for the accumulation of mandates rather than to form his government, we should have no doubts about the future of French growth. We can’t have any elsewhere, because otherwise Macron will throw a tantrum and stop breathing until something happens to him. In short, all this to say that the CAC40 ended up 0.12% and that in the process, Moody’s lowered the credit rating of seven French banks by one notch, after having downgraded France’s sovereign debt rating last week. last. The deterioration of the banks’ rating is also the direct consequence of the downgrade of that of the country. I imagine that certain French politicians who STILL have not understood what a RATING ORGANIZATION is, will hasten to accuse the motion of censure, the extreme right and the extreme left of being responsible of all that… It is especially Crédit Agricole and its subsidiaries as well as BNP which are taking their position.
And now
The question we will have to ask ourselves from now on is: “And what do we do now??” “. Well, to be frank with you, we’re going to wait for the FED, listen to everyone’s opinions and try to find out what the said FED is going to do next year. This morning there should therefore be a minimum of movement until this evening. For the moment, Japan is down 0.7%, while China and Hong Kong are up more or less 0.6% while a report published in China suggests that the government should increase tax spending. But to be frank, we’re just waiting for the FED and there’s not much point in digging further at the moment and especially six days before Christmas when we haven’t finished giving the presents. Oil is at $69.83, gold is at $2,661 and Bitcoin is at $104,000.
This morning there is a glaring absence of news, as if everyone had decided to say nothing and do nothing while waiting for this evening. As if it had been agreed not to destabilize the day with news that could disrupt Powell’s statements. And that’s good, because as I came back from Brussels last night very late because Easyjet was late (as usual) and I missed my alarm, there’s less to read and write when we’re in a jam like me right now! But on the other hand, note that COCOA is at its all-time high, that will really help when buying Christmas chocolates…
On the numbers side, there will be the CPI in Europe – if anyone is interested – and of course, tonight is Powell’s evening. So we’ll see you again first thing tomorrow to talk about it. This time I’m setting 4 alarms and I’ll see you at 7am tomorrow!
Have a nice day everyone!
Thomas Veillet
Investir.ch
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Philip Fisher.
