#Market Strategy — 12.07.2017

Why The Markets Need To Consolidate This First Leg To The Upside

Florent Bronès

During the first half of the year, two mains things happened. One is that the price of risky assets moved up very significantly, thanks to solid and positive fundamentals. And secondly, the dollar declined, which we will try to explain.

Stock markets went up very significantly during the first part of the year. This is due to positive fundamentals. The first is economic growth. There is moderate but solid economic growth in mature economies and very importantly it is synchronised economic growth for the first time in this economic cycle, meaning that all mature economies are contributing to growth. Consequently, earnings are growing and the corporate sector is going to deliver double-digit earnings growth this year which is of course a very strong positive. And, for the first time, analysts are beginning to revise up their forecasts for this year and next year. Inflation is not accelerating, so in fact all fundamentals are on a good track. However there is nothing new in all these positive factors so the markets are already discounting them. We think that in the short term, the markets need to consolidate this first leg to the upside.