Invest in the Best: The Halloween Effect and Market Strategies

2023-10-31 08:03:00

The stock markets started the week on the rise, before an obstacle course made up of company results, central bank decisions and macroeconomic statistics, all in a tinderbox context in the Middle East. This morning, the news is regarding the Halloween effect, China, Tom Sawyer, the Bank of Japan, Apple and the American car manufacturers.

I start with Halloween, this Anglo-Saxon tradition which saddens the ancients and delights its many followers. Should I admit that I showed up to the office this morning wearing an imitation of Gandalf’s felt hat? No one was up early enough to prove it. In the markets, there is a “Halloween strategy”, which is none other than the counterpart of the adage “sell in May and go do something else” (sell in may and go away). Basically, it’s regarding investing in what is statistically the best part of the year, i.e. from the beginning of November to the end of April, and moving on to the half-year from the beginning of May to the end of October. We can debate the question of staying invested or not and many other things, but the figures show that in the United States over a long period (1970 to 2017), November/April generated a 6.9% increase. average and May/October 1.5%. The fact that May, September and October are, statistically, the most losing months of the year is of course no stranger to this. Moreover, most markets have a semi-annual seasonal effect of this type, according to academic research. So if you want to start investing, the oracles (and the stats) recommend that you do it now rather than in six months.

Let’s continue with these much more down-to-earth things, with an American session which ended yesterday with an increase of more than 1% for the three major indices, with a podium dominated by the “old” Dow Jones. This apparent homogeneity, however, hides singular trajectories. The best performances are, for example, to be found in consumption and finance, that is to say fairly traditional sectors. The Nasdaq had to rely on its heavyweights Apple, Microsoft, Amazon and Alphabet to counter the decline of Tesla and the semiconductor sector following the warning from ON Semiconductor (-22%). Investors consider the resistance of quarterly company results as a branch to hold on to in a context that is still tense elsewhere. And then we are still in the Peter and the Wolf syndrome: as economists have been announcing for two years that a recession is likely to occur within two months and that it never happens, the market is starting to convince itself that the American economy is invincible.

In Europe, we also progressed yesterday, but the company results are less flamboyant (and this time, I have figures). And maybe it’s Tom Sawyer syndrome, who-is-afraid-of-nothing-he’s-an-american : European companies seem more cautious in their outlook. Which did not prevent the Stoxx Europe 600 from gaining 0.4%, led by the rebound of Sanofi (+3.3%) following Friday’s purge, the rest of the health sector and LVMH. In Europe too, ON Semiconductor’s warning caused damage by hurting Infineon, STMicroelectronics and ASM International.

The results will still dominate today’s session and the next, at least until Wednesday evening, when the Fed will communicate its monetary policy orientations. But it was the Bank of Japan which was the first of the central banks to draw this week, a few hours ago. As expected, Japanese rates remained unchanged. But contrary to what a majority of observers thought, the BoJ maintained a very flexible orientation, contenting itself with cosmetic adjustments in its phrasing. The yen therefore lost ground. However, it was not the BoJ that caused the most talk last night, but rather the markers of Chinese activity. The PMI indicators, which measure the risk appetite of purchasing managers, disappoint once more following a slight improvement: the manufacturing PMI falls back into the contraction zone at 49.5 points, while that of services increases from 51.7 at 50.6 points. Both figures are lower than expected. Comment from economist Robert Carnell (ING): “This is a slight shock given that recent activity data had strengthened, and suggests the economy is still struggling“. Bad figures therefore, which reinforce the scenario of China’s inability to restart its economy.

In the United States, three important announcements attracted attention last night. First, the UAW union ended a six-week auto strike following a global agreement with Stellantis, Ford and General Motors. This is an important industrial achievement, which should help improve sentiment on inflation (low vehicle supply relative to demand contributes to rising prices for new and used automobiles, a component not -negligible in the calculation of inflation). Second announcement, the US Treasury indicated that it planned to borrow a little less than planned in Q4, thanks to larger inflows than had been planned. The announcement may help to ease the pressure on rates (even if this is not really the case at the time of writing) before the announcement, on Wednesday, by the same Treasury of the details of its upcoming bond issues. Finally, in a lighter area, Apple yesterday unveiled three new very powerful chips and its new MacBook. Enough to attract the attention of investors to the innovations before a publication that is a little more risky than usual. Apple presents its Q3 results on Thursday, in a context marked by a redefinition of the iPhone supply chain and a denigration campaign from Beijing towards the American smartphone.

On markets that are closed or whose session is well advanced, Japan (+0.6%) and Australia (+0.1%) are gaining ground, but the rest of the rating is rather red. Mainland China fell moderately, but Hong Kong, more sensitive to today’s rotten macroeconomic data, lost 1.8%. South Korea lost 1.4%: following having suffered market doubts regarding the automotive battery industry in recent days, the relapse in the Western semiconductor compartment is causing damage in Seoul. India is down moderately. European leading indicators were bearish early this morning. But the VIX nervousness index has fallen below 20 points, a sign of a slight relaxation on the markets. The CAC40 gained 0.16% to 6836 points at the opening. The SMI fell by 0.1% to 10,371 points, while the Bel20, powered by Anheuser-Busch Inbev and ArgenX, soared by 1.1% to 3,344 points.

NB: The illustration was produced by artificial intelligence with Midjourney, with inspiration from the world of Tim Burton.

Today’s economic highlights

The day started with a battery of macroeconomic indicators in Japan, with the BoJ’s monetary policy decision then, the unemployment rate, industrial production and retail sales (between 00:00 to 00:50). Then, China took over with the official October PMIs (02:30). In Europe, French inflation figures (8:45 a.m.) then the EU (11:00 a.m.) will animate the morning. Finally, in the United States, the FHFA real estate prices (2:00 p.m.), the MNI Chicago PMI (2:45 p.m.) and the Conference Board confidence index (3:00 p.m.) will take over. The whole agenda here.

The euro is trading close to 1.06 USD. An ounce of gold has fallen back below the symbolic threshold of 2000 USD. Oil remains under pressure, with North Sea Brent at USD 86.59 per barrel and American WTI light crude at USD 82.58. The performance of the American debt over 10 years evolves at 4.87%. Bitcoin is trading around 34,300 USD.

The main changes in recommendations

Accor: Citi maintains its buy recommendation with a price target raised from 41.50 EUR to 42.60 EUR. Adyen: Jefferies remains to be retained with a price target reduced from 758 EUR to 720 EUR. Air France-KLM: Morgan Stanley maintains its equal weighting recommendation with a price target reduced from 19.50 EUR to 14 EUR. Air Liquide: Morningstar maintains its recommendation to hold with a price target raised from 148 EUR to 150 EUR. Amplifon: JP Morgan maintains its recommendation to hold with a price target raised from 148 EUR to 150 EUR. its neutral recommendation with a price target reduced from 34.10 EUR to 29.70 EUR.BAE Systems: Morningstar goes from buy to hold with a price target of 1170 GBX.BE Semiconductor: Morningstar goes from hold to sell with a price target raised from 82 EUR to 86 EUR.Burberry: Morningstar improves its recommendation from hold to buy with a price target of 2090 GBX.Bureau Veritas: Goldman Sachs maintains its buy recommendation and reduces the price target from 37 EUR to 36 EUR. Berenberg maintains its buy recommendation and reduces the price target from 29 EUR to 28 EUR. Société Générale maintains its buy recommendation and reduces the price target from 31 EUR to 27 EUR.Clariant: Stifel maintains its hold recommendation with a price target reduced from 15.60 CHF to 14.70 CHF.Eramet: Portzamparc maintains its reinforced purchase recommendation with a price target reduced from 185 EUR to 180 EUR.Eurofins: Bernstein moves from underperformance to market performance with a price target reduced from 53 EUR to 45 EUR.Fnac Darty: Bryan Garnier maintains its sell recommendation with a price target reduced from 27 EUR to 21 EUR.Geberit: Jefferies maintains its underperformance recommendation with a price target reduced from 313 to 311 CHF.Getinge: Morningstar moves from hold to buy with a raised price target from 221 SEK to 247 SEK.Holcim: Jefferies remains to be retained with a price target reduced from 62.60 CHF to 58.10 CHF.Intercontinental Hotels: JP Morgan goes from neutral to underweight with a price target reduced from 6300 to 5400 GBX.Kering: Morningstar maintains its buy recommendation with a price target reduced from 650 EUR to 600 EUR. Goldman Sachs moves from buy to neutral with a price target reduced from 670 EUR to 470 EUR. Societe Generale maintains its recommendation to hold with a price target reduced from 430 EUR to 419 EUR.Kerry: Morgan Stanley moves from overweight to market weighting with a price target reduced from 101 EUR to 80 EUR.Kingspan: Jefferies maintains its recommendation underperformance and reduces the price target from 56 EUR to 54.50 EUR.Lonza: Morgan Stanley maintains its overweight recommendation and reduces the price target from 650 CHF to 450 CHF.M6 Métropole Télévision: Société Générale maintains its recommendation purchase with a price target reduced from 18.40 EUR to 17.60 EUR. Mercedes: RBC Capital maintains its outperformance recommendation and reduces the price target from 88 EUR to 85 EUR. Landesbank Baden-Wuerttemberg maintains its buy recommendation with a price target reduced from 99 EUR to 86 EUR.Moncler: Morgan Stanley maintains its weighting recommendation in line with a price target reduced from 64 EUR to 58 EUR. Morningstar moves from sell to hold with a price target of 47.50 EUR. MorphoSys: Citi maintains its sell recommendation with a price target raised from 23 EUR to 26 EUR. Reckitt: Société Générale maintains its buy recommendation with a price target reduced from 7500 GBX to 7100 GBX.Rémy Cointreau: Société Générale maintains its recommendation to keep with a price target reduced from 125 EUR to 110 EUR.Roche: JP Morgan maintains its recommendation to underweight with a price target reduced from 125 EUR to 110 EUR. 260 CHF to 245 CHF.Saint-Gobain: Jefferies maintains its buy recommendation with a price target reduced from 85 EUR to 80.10 EUR.Scor: Morningstar moves from hold to buy with a price target of 33 EUR.Sika : Jefferies remains Buy with a price target reduced from 338 to 332 CHF.Siltronic: Deutsche Bank maintains its Hold recommendation with a price target raised from 65 EUR to 70 EUR.STMicroelectronics: Morningstar maintains its Buy recommendation with a price target raised from 60 EUR to 63 EUR. Baird goes from outperform to neutral with a price target reduced from 50 to 35 USD (for the ADR).Swedish Orphan Biovitrum: Morgan Stanley maintains its recommendation to overweight with a price target raised from 280 SEK to 295 SEK.Technogym: Goldman Sachs maintains its neutral recommendation with a price target raised from 9.20 EUR to 9.50 EUR. Unilever: Morningstar maintains its buy recommendation with a price target raised from 4450 GBX to 4560 GBX. Wise: Wells Fargo initiates a recommendation to overweight with a price target of 850 GBX.X-Fab: Deutsche Bank maintains its buy recommendation with a price target reduced from 13 EUR to 12 EUR.

In France

Company results (comments are given directly and do not prejudge the evolution of securities)

Bouygues confirms its annual forecasts, while reporting a market environment that remains difficult for the real estate sector. Casino publishes revenues down -5.3% in Q3 on a comparable basis. Imerys lowers its forecast for Ebitda for the 2023 financial year. SES exceeds consensus on 3rd quarter turnover and confirms its forecasts for the current fiscal year. Stellantis estimates the cost of strikes in American factories at €3 billion in turnover. business September to October 2023. Q3 figures are higher than expectations. Thales confirms its objectives following an increase in turnover but a decline in orders in Q3.

Important (and not so important) announcements

The UAW union ends six weeks of strike following an agreement with Stellantis, Ford and General Motors. The European Commission approves the sale of Thales’ signaling activities to Hitachi. The explosion in a mine of the ArcelorMittal group in Kazakhstan cost the lives of 46 miners. The country has seized the group’s local subsidiary. Air Liquide launches an employee shareholding operation. Engie acquires 545 MWac of solar assets in Brazil for €618 million. Eiffage signs a €100 million contract for the Cambacérès campus in Montpellier. Vallourec is launching an investment program reserved for its employees. Moody’s ceases to rate Casino’s debt. Latécoère launches a capital increase of €108.2 million at EUR 0.01 per share, with DPS, for an issue of 10.82 billion shares.They have published / They must publish : M6 Métropole Télévision, Sogeclair, Ober, Cabasse, Mastrad, Florentaise, AMA Corporation, Coil, Sirius Media, Veom, Gaussin, Nacon, BigBen, Wavestone…

In the big world

Company results (comments are given directly and do not prejudge the evolution of securities, except for post-session exchanges in the United States, which normally reflect the trend well)

Anheuser-Busch Inbev improves its Q3 results despite the drop in volumes, thanks to price increases and cost reductions. BASF publishes lower results and targets the lower end of its forecast range. BBVA posts €2.08 billion in Q3 profits, a little more than expected.BP Plc announces Q3 profits of $3.3 billion, but fails to meet its forecast due to weak gas production.Carlsberg publishes online instead with expectations in Q3.Pinterest gains 16% off-session following its quarterly results.Redcare Pharmacy exceeds its profit forecasts in Q3 and confirms its forecasts.Welltower raises its targets. The title does not react.

Important (and not so important) announcements

Apple presents new MacBook Pros and a family of M3 chips. Unilever freezes the fixed salary of its CEO Hein Schumacher for two years. Logitech appoints Hanneke Faber (ex-Unilever) as general manager, effective December 1. Meta Platforms offers ad-free subscriptions to Instagram and Facebook in Europe. Tesla is suffering, the reduction in production from battery supplier Panasonic fueling fears regarding demand for electric vehicles. Prysmian signs a €900 million contract with Clean Path New York for the supply of submarine and terrestrial cable systems. Repsol suspends its hydrogen investment plan in Spain due to tax uncertainties. Roche fails in the EMBARK study on Duchenne disease. Vodafone sells its Spanish branch to Zegona for €5 billion. Galapagos has signed a letter of intent to sell Jyseleca to Alfasigma for an initial payment of €50 million and milestone payments totaling €120 million. The laboratory will lay off 100 people to reduce its costs. BP Plc is looking for partners for its shale gas operations in the United States. Intesa Sanpaolo is strengthening its position in Romania thanks to the acquisition of First Bank. BlackBerry CEO hands over. Nvidia is testing chatbots in the chip design process in order to make greater use of AI. The main publications of the day: Caterpillar, Amgen, Ecolab, Toyota Motor, Samsung Electronics, Marathon Petroleum, BP Plc, Midea Group, Advanced Micro Devices, Pfizer, Anheuser-Busch Inbev, Stellantis…The whole agenda here.

Lectures

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