13 February 2023

Financial markets, still doubtful between inflation and interest rates

In the past week, financial markets continued to question the future course of inflation and interest rates. Fed Governor Powell reiterated that there is still a long and winding road ahead to bring inflation back to 2%. And the latest German inflation figures seem to confirm that in Europe, too, the path to the end of the rate hike phase is still a long one. Against this backdrop, the stock market is interrupting its rally phase and bond prices are also slowing down. Let’s take a look at some data on the weekly trend in our analysis.

In the past week, 32% of the instruments and indices used for our analyses showed a positive change. 67% experienced a negative variation. Analysing by macroclass, 33% of the equity instruments and indices recorded a positive weekly variation. 5% of bond instruments and 50% of the other asset classes used for our analysis.

Improving valuations in the past week accounted for 28% of the total. The previous week, valuations that had been adjusted upwards were 26% of the total.

Among the equity sector analyses, improving valuations were 21% of the total. The equity sector suffered on Powell’s words and assumptions of a slower than expected decline in inflation.

In the analysis of bonds, improving valuations accounted for 56.25 per cent of the total.

Among analyses of other asset classes, improving valuations accounted for 47 per cent of the total. Analyses relating to sentiment, currencies and commodities were included in this section.

Of the valuations, 27 per cent were above the short-term average. 25% were above the long-term average of valuations. Last week it was 29% and 26% respectively.