24 November 2023

On Tuesday April 13, 2023, the CAC 40 index of the Paris Stock Exchange broke its historic record at nearly 7,400 points.

PThe insatiable follower of Beep Beep, the running bird from the Chuck Jones cartoons, the coyote is used to defying the laws of gravity. He crosses the cliff, continues to walk in the void… before realizing his precarious situation and plunging into the precipice. Could the stock market also be testing the limits of weightlessness on earth?

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One might think so by noting the insolent health of the equity markets at the start of April 2023. Yesterday, the CAC 40 index of the Paris Stock Exchange broke its historic record at nearly 7,400 points. His European colleagues are following the same slope and, in the United States, the Standard & Poor’s index has been on a continuous rise for a month, making up for its disappointments at the start of the year.

However, there is nothing to cheer about if we look at the inflation which is struggling to decline, the rise in geopolitical tensions and above all the banking crisis which has brought down the favorite bank of Silicon Valley billionaires and the one of the most famous Swiss institutions. The recession threatens, but investors prefer to look elsewhere, as if they do not see the vacuum under their feet.


Three reasons for this. First, in the United States, a catch-up effect from certain technological stocks that have been massacred for several quarters, with declines exceeding 30% to 50% and which are becoming buying opportunities, in particular Microsoft, Apple or even Facebook. Hence the 7% increase in March of the Nasdaq index of technology stocks. Europe does not have great technological value, but it does have fine multinationals, particularly in luxury or mass consumption, which are posting spectacular profits.

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Finally, note the anticipation of an upcoming pause in rate hikes, in particular to relieve a shaken banking sector. As in the cartoons of Chuck Jones or Tex Avery, bad news magically becomes good news. A banking crisis gives hope for a softening of the central banks.

But the signs of an end to weightlessness are piling up. Inflation is setting in and could be fueled by climate investment plans and the war economy, corporate profits are not due to higher sales but to higher margins, which themselves fuel inflation, which will not last long. Moreover, gold is at an all-time high, a sign that concern is gaining ground. The coyote suspended in the void will soon be able to take out his sign “The lessons of gravity”. Like a return to physical reality.

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