Since the beginning of the year, the stock market has been struggling, whether it is the CAC 40, the Dow Jones or the Nasdaq. A worrying trend that is not likely to change by the end of 2022.
The stock market and bonds have been particularly hard hit since the beginning of 2022. The world’s stock markets have been in the red very often, weighed down by the price of government bonds (sovereign bonds, whose rates move inversely to prices) in the United States, France, Germany and the United Kingdom.
The loss of wealth on investments has been historic this year, as noted by Frédéric Rollin, Investment Strategy Advisor at Pictet Asset Management. He points out that in the United States, during the first three quarters, a diversified portfolio, half invested in US equities and half in government bonds, has melted by more than 20%, the worst underperformance in more than a century.
With bonds and equities falling by the same amount, “there is nowhere to run”, says Frédéric Rollin, who explains that the tenacity of inflation is “very bad news”. Faced with rising consumer prices, the Fed has indicated that it will keep rates high for a long time. As a result, the bond market has collapsed.
While the decline is already historic for 2022, the last quarter could still hold many unpleasant surprises. For while stocks may appear oversold in the short term, the downward trend in stock and bond prices is still unchallenged.
In the eurozone, price increases show no signs of slowing down. Indeed, inflation jumped again in September to reach 10% year-on-year. This new record is notably fueled by soaring energy and food prices. “The last quarter is starting with expectations of an aggressive rate hike by the Fed but also by the European Central Bank and the Bank of England,” says Ipek Ozkardeskaya, an analyst at Swissquote Bank.
The stock market this morning
The main European stock markets are falling this morning for the first session of the last quarter of the year due to persistent fears of recession. In Paris, the CAC 40 lost 1.19% to 5,693.65 points, in London, the FTSE 100 lost 0.5% and in Frankfurt, the Dax fell by 1.07%. The EuroStoxx 50 index is down 1.14%, the FTSEurofirst 300 by 0.74% and the Stoxx 600 by 1.03%.
At the beginning of the fourth quarter, the concerns that have been weighing on the market for the past three months are still present, namely the impact of the tightening of monetary policies of the major central banks and the war in Ukraine on inflation and the energy situation.
This Thursday, the minutes of the European Central Bank’s latest monetary policy meeting will be released, and on Friday, the monthly U.S. employment report will be unveiled.
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