We maintain a positive outlook on equities, particularly in the technology and commodity sectors. Our perspective diverges from the market’s expectations regarding the quantity and extent of rate cuts by the end of 2024. However, our sentiment remains negative regarding China. Historically, If we do not have a recession, stocks tend to rally after the Fed cuts.

Equities

S&P : 4769.83

Following a robust 33.50% upswing since the October 2022 low, there is potential for the index to extend its gains beyond the current range. However, a modest and beneficial correction to 4626 may be in order. Our confidence in the positive outlook is underpinned by the relatively favorable economic indicators, and we anticipate the momentum to persist. The notable advancements in the technology sector further support our optimistic stance.

CAC40 : 7543

Achieving new highs, our optimism for French equities is tempered by the recent sharp surge. Given the predominant influence of luxury stocks in the index, we do not anticipate a significant skyrocketing in January. Nevertheless, we maintain a belief in the potential for upward movement in French equities, particularly considering that underperforming components from 2023 could drive positive momentum. We foresee a correction, possibly retracing to the 7391 area.

CSI 300 : 3277

Anticipating no notable improvement in the near future, the state of China’s economy appears less than favorable. The ongoing trend doesn’t offer much variability for analysis. As a result, we’ll maintain our focus on the existing momentum.

Commodities

GOLD (XAU) : 2062

Reaching new highs, prices are surpassing the upper bounds of the triangle band. Despite this surge, we maintain confidence that precious metals like Gold may undergo a period of consolidation before experiencing further upward movement.

Crude Oil (CL1) : 71.65

Our perspective is that commodities, as a whole, are currently undervalued. Analyzing commodity prices requires consideration of distinct clusters corresponding to various economic regimes, rather than a broad time-span. Presently, Crude Oil is at lower levels, and we anticipate an upward trajectory, reaching first 80 and then 90.

Rates

US 10Y & Spread 2Y 10Y: 3.87 & -37

The 2-10Y spread has rebounded from historical lows, indicating reduced expectations of a looming recession. As for the US 10Y yield, we observe it dipping below the average range. Our outlook considers the inflation decline to be gradual, and we believe the market has overestimated the likelihood of FED rate cuts. Consequently, we anticipate the 10Y yield to revert to the range and climb back above 4%.