Back to routine: Will the markets keep rising?

As summer draws to a close, the predominant trends in recent weeks are giving way to new challenges and opportunities, with market players adjusting their strategies to cope with an uncertain economic landscape.

Stock markets have enjoyed a very strong year so far, and the summer months have been bullish as well. For Alberto Matellán, General Manager of La Financière Responsable (LFR), the fundamentals suggest that this optimism could continue in the months ahead.

That said, he warns that professional investors are likely to start closing positions to avoid potential losses in the final stretch of the year—a “cautious” stance that Matellán considers appropriate for all types of investors. “I don’t see anything wrong with maintaining a cautious stance, and beyond that, the European fundamentals still point to potential gains,” he notes.

Meanwhile, bond markets have seen long-term yields move higher. According to Matellán, this reflects a combination of factors, including the re-emergence of inflation risk, central bank messaging, the volume of new issuance, and concerns over sovereign debt.

France has particularly come under scrutiny on that last point. The General Manager of LFR believes that the possibility of Bayrou losing the confidence vote is already priced in, and that the real challenge lies in forming a government capable of reducing the deficit. “What’s really needed is a government that can unite all the country’s political forces and take the necessary measures. Right now, there simply isn’t a government capable of carrying this out,” he emphasizes.

Will we see rate cuts?

Markets typically favor lower interest rates, but according to the General Manager of LFR, a cut in Europe wouldn’t be justified from a macroeconomic perspective. “While the situation isn’t perfect, Europe is still experiencing growth, and inflation is hovering around 2.1%. In this context, rate cuts simply aren’t warranted. It would be very hard to justify lowering them,” he explains.

The picture in the United States is broadly similar, though the numbers are somewhat different. “In reality, US inflation remains higher than in Europe. And while rates there started from a higher level and therefore have more room to come down, the macro backdrop doesn’t justify a cut either,” he adds.