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Key points
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Frederic Moeremans d'Emaus, senior equity portfolio manager at Valori Am, explains what the markets might look like in the coming months, emphasising both the importance of global growth and the sectoral valuation, which sees the US technology segment in particular with somewhat stretched valuations.
Has the pricing scenario changed for the coming months? If so, in what way? What will be the main drivers?
The stock market scenario has undergone a significant change in the last period: what is striking is the increasingly pervasive interference of the US government in the economic and monetary sphere. Examples of this are the Intel affair, Powell's change of course and the pressure exerted on the various Fed members to condition their decisions. Added to this is an environment in which the markets discount a rather optimistic scenario, while the main drivers will remain global growth trends, monetary policy decisions and geopolitical developments.
Do you think the current stock market valuation is correct or do you see overvalued prices?
Valuations must always be read in relation to expectations of future growth and their actual credibility or realisability. It is undeniable that, both on a historical basis and on forward estimates, we are in the upper part of the trading range. Analysing a wide range of parameters, several signals emerge that call for caution: the market is now discounting an overly rosy scenario, even leaving aside geopolitical factors or the potential impact of new tariffs.
How will geopolitics affect the markets?
The recent meetings between the US, Russia, Europe and Ukraine have brought geopolitics back to the centre of the debate. Investors cannot overlook the risk that possible tensions will lead to new waves of volatility, directly affecting both comenergy and overall market sentiment. It also remains to be seen to what extent a positive resolution of the conflict in Ukraine could translate into strong spending commitments for EU countries.
What are the unknowns you fear most?
.The first quarter has already shown less vigorous global growth. Should the second half of the year fail to reverse this trend, the recessionary spectre could reappear and lead to a significant correction in stock markets. This represents the main risk to be taken seriously. Another source of uncertainty will be the impact of US tariff policy on the inflation rate.
