The end of the year is approaching, the time when fund managers, whether the annual periodicity is fair or unfair, must be accountable to our investors. What are we facing?
The quarterly publication of company results is coming to an end. In the United States Profits exceeded expectations by more than 6% and, in Europe, by more than 7%. A new publication of the results will not begin until the second half of January, and there is nothing to suggest that they will be bad at that time. So far this year, we have met with three hundred publicly traded companies from 20 different countries, and booming business continues to be the general trend.
The International Monetary Fund released its latest economic forecast in October, forecasting global economic growth of 3.2% for 2024 as for 2025. Good growth, slightly above the historical average. Developed countries growing by 1.8% and emerging countries by 4.2%. He will not make new forecasts until January.
Services PMI Data Reveals Services Not Only Remaining Strong, but Accelerating. If we take into account the economies of the United States, Eurozone, Japan, United Kingdom and China, and average the monthly data released, we will observe that the average for 2022 was 51.0 , that for 2023 was 52.4. and that of 2024, until October inclusive, is 52.7. Above 50 means demand for services remains expansive. As we know, there is no possible recession with a strong demand for services, given that the weight of services in GDP exceeds 70% in advanced areas of the world such as the United States or the euro zone and represents around two thirds of GDP. the GDP of the entire world economy. There are therefore no symptoms of a slowdown in demand for services, nor a recession in sight. Consumption remains high, more oriented towards services and less towards goods for around three years now. Of course, more service-oriented sectors and geographies fare better. For the economy, it is the level of global consumption that is more important than its direction.
Global unemployment rates remain well below their historical averagein the minimum zone. The unemployment rate for all the world’s advanced countries is 4.6%, lower than the average of 6.6% from 1980 to today. This allows families to finance their obvious appetite for services through their own work, their main source of funding. The fact that services are labor intensive no doubt contributes to the low unemployment rate. Simply taking the example of Spain, we will see that there have never been 21.8 million employees contributing and that, moreover, public sector revenues are reaching historic highs.
Inflation rates are controlledeven if the underlying inflation rates, those considered more structural, present greater resistance, located around 3.3% in the United States and 2.7% in the euro zone. This made it possible to begin the decline in short-term interest rates… and the rise in long-term rates. If we compare the existing rate curves at the end of December 2023 with the current ones, we will observe a characteristic cross shape, with short-term interest rates falling for maturities of less than three years, and increasing after this maturity. The necessary temporary risk premium that must exist between long and short rates is still insufficient, so this movement should be expected to have greater continuity until 2025. The cross will open even more.
Existing geopolitical risks remain stagnant, with no short-term solution, despite Trump’s entrance onto the scene. Interestingly, new hypothetical geopolitical risks, such as the China-Taiwan conflict, have a much higher probability of occurring in the West than in China itself. You are not expected.
Trump’s protectionist ideas will clash not only with the limited economic reality, but also with the fact that this is his second term, which reduces, in practice, his possibilities of action to the first two years.
Finally, despite the boom in business and the good performance of the stock markets, no euphoria is recordedneither among companies which remain very focused on their activity, nor among investors who, far from attacking the winning horses, the stock market funds, have even saved them to invest them in monetary funds. Never seen before. This predicts a continuation of the current upward movement of the stock market.
How to prepare for the end of the year? Just maintain the winning strategy so far this year. It’s not over yet.
