Kepler Cheuvreux: Some U.S. data is indicating a slowdown

You’re right that, you know the data from the payroll itself was I would say not so bad, you know, rather going in the Fed’s direction. So an economy and a labor market that is not too hot and not too cold either. Having said that, you know it also came on top of other data in the US that last week which sort of painted a sort of a slow down picture, you know like the ISM indicators in terms of what our viewers should be doing. I I that is you know the obvious question what would you be doing? Let’s say you’re a a viewer of this show. You’ve been pretty fully invested. You’ve enjoyed the AI inspired rally. What now that’s the that’s the right question to to to to ask because you know I see two two different behaviours. You know first you have some some investors that are considering that I would say as you just sort of hinted at, you know nothing changes really and we’re still in the same environment that we’ve had and that have been carrying, carrying this, this bull market up until now. So for some people you don’t just don’t do anything, you know, you just stay as you are, you stay invested, stay exposed to the US and to this technology revolution. The other approach is on the other hand is to consider I would say the inflation surprise of Q1 as a as a rather negative surprise because it has extended you know the time in which the economy is going to have to live with higher interest rates, much higher interest rates in fact now at best we’re going to get a rate cut in September. Think about what we expected to six months ago and that as a consequence is going to slow down the economy which is also somehow now probably what’s needed to cool inflation further to to to Fed’s last mile, you know the to the Fed’s 2%. So if if, if that’s the case, if that’s true then you know you you you might want to to to take a more defensive view on this market. After all cash is going to yield a great return for for longer and we are if you think about what’s coming next, I think the US election are the big thing. This is a a leaf out of the Warren Buffett book about putting some cash on the sidelines there. So it’s ready to deploy down the track potentially. In the meantime, take the yield. Can I ask you about the behaviour though on markets because it has that flavour of the NASDAQ for the last number of years where every time there’s a sell off that participants got dragged back off the sidelines and the market just went right back up again. And it feels like we’re getting that appetite again thanks to any monetary policy changes that, that the market’s repricing around. Do you agree that’s the the type of market behaviour you’re watching at this point where there’s a bit of FOMO, a fear of missing out. Yes, I think you’re right especially in technology every time market gives an entry point you have a a crowd of investors willing to to to buy that that point and and markets about go back goes back up again. I think that’s what we saw very aggressively Last week was a big week for the the NASDAQ and overall you know we’re already reapproaching back to the high on that market, not the case for the S&P and and for broader European indices that is true. But now look, I think what I find interesting though looking at this earning season which was supposed to be the point of strength and to be fair, you know Q1P have been very good. But I’ve been surprised to see that some our earnings expectation for this year are struggling to go higher including in the US In fact they are coming up to my the surprise somehow in Europe you’re seeing a bit of earnings revisions, expectations were very low, whereas in the US expectations are very high and you’re not seeing expectations going up despite despite the boom, you know I would say booming Q1 in some areas even in the AI sort of space. So that also I think is a, is is is an issue for for for the Bulls.