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The Paris Stock Exchange and Wall Street have witnessed a significant decline this week, with the CAC 40 bearing the brunt of the fall. The index has plummeted from Friday to the following Monday, primarily due to the resurfacing of fears about Donald Trump's tariffs and the trajectory of long-term U.S. interest rates.
Trump's renewed tariff negotiations with Europe, as evidenced by his suggestion of a 50% increase in tariffs on the European Union starting early June, has added to the stock market's woes. Additionally, his demands for Apple to pay at least 25% tariffs on iPhones not manufactured in the U.S. have further heightened investor concerns.
The rise of interest rates, both in the U.S., Japan, and Europe, has further weighed on the stock market. The 30-year U.S. Treasury yield has exceeded 5% for the first time since 2023, while the 30-year yields in the UK and Japan are at their highest since the start of the 21st century. This rise in interest rates is largely due to Donald Trump's budget bill, which provides for more significant tax cuts than previously planned, leading to expectations of a federal deficit of over 6% of GDP.
However, Momentum's stock selections have performed significantly better than the CAC 40 this week. Stocks like Carrefour, Engie, Orange, Exosens, and Danone, all suggested for purchase by Momentum's team of analysts, have shown remarkable resilience in the face of the market downturn.
This week, Momentum's readers were also furnished with a technical, financial, and economic analysis of numerous stocks. The analysis included Renault, ArcelorMittal, Teleperformance, Schneider Electric, Kering, Hermes, Safran, Orange, Eurofins Scientific, EssilorLuxottica, Carrefour, Bureau Veritas, Amazon, and Icade.
In summary, the CAC 40's significant drop compared to Momentum's stock selections can be attributed to a combination of factors, including sector-specific and economic difficulties affecting French large caps, market rotation favoring high-momentum growth stocks, and the broader, more diversified yet less growth-focused composition of the index. Momentum strategies typically capture stocks with better recent performance trends, providing a degree of insulation from the market downturn impacting the CAC 40 this week.
Investors are expressing concerns about potential negative impacts on the stock-market, as Trump's plans for increased tariffs on European goods and higher interest rates continue to unfold. In contrast, actions like investing in recommended stocks by Momentum, such as Carrefour, Engie, and Orange, have demonstrated resilience in the face of the market decline due to their growth potential and better performance trends.
