While the Paris Bourse has exceeded 8,000 points for the first time in its history, the context remains unpredictable. Numerous indicators have been presented recently, but there is no clear outlook for the time being.

What is happening with the central banks?

At the start of this year, the central banks, notably the ECB (European Central Bank) on 07 March 2024, are staying the course. Even if inflation slows more quickly than expected, they have decided for the time being to maintain key rates at their current levels. The assumption is to wait for a lasting slowdown before acting on key rates. Both the Governor of the Banque de France and Jerome Powell, Chairman of the Federal Reserve (FED), have just mentioned possible rate cuts this year, or even towards the end of spring in Europe. Why wait? Simply so as not to rekindle inflation, which has caused difficulties for many companies.

 What are the concrete indicators to watch?

In 2024, inflation remains high, even if it is slowing around the world, and could fall below 2% in France in 2025, according to INSEE. Against this backdrop, the growth outlook for several countries has been revised downwards.

Whether in France, where the government has just announced a growth forecast of 1% in 2024 (0.8% according to the Banque de France and 0.9% according to the OECD), or in Germany, where the outlook is even more modest, with the DIW Institute predicting stagnation in GDP following a period of recession. Unemployment figures are still high.

What's happening on the stock market?

The CAC40 is over-represented by luxury goods, energy and healthcare companies. As a result, these companies, driven by the global economy, may be out of step with the real French economy. Moreover, for these companies, inflation has had no impact on profitability, given the margins in the sector, and may even have contributed to its increase in the case of the energy sector.

Buoyed by the FED's announcements, technology stocks and, more generally, high-growth stocks, the S&P 500 also hit record highs.

Against this favourable backdrop, the uncertainties concern the conflicts in the Middle East and Ukraine, the European elections and the presidential elections in the United States.

The economic world is in a constant state of flux, which is why we need to review our allocation of financial assets on a regular basis. If you too would like the support of financial advisers, contact us!

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