We have decided to stay on convictions expressed in our last committee (October 2nd). We think the rally of recent days is due to hot money speculating on the intervention of central banks. The Fed is expected to keep its rates near zero and Mr Draghi should do “something”, but it is not clear what.
Benoît Cœuré, board member of the ECB, has declared in an interview after the meeting of the IMF this weekend in Lima “We do not-have enough information to fully understand the trend. It is really premature to talk about concrete measures in terms of broadening QE. If anything would happen, we want to know what we would do”.
We believe it is not appropriate to speculate on the intervention of the ECB, at least not yet. Our base scenario remains unchanged (defensive).
The S&P500 is testing resistance at 2,014 points. This resistance could possibly be broken as long as the US corporate earnings are better than expected. If this is not the case, there could be a significant correction and re-test the low of August.
The results of European companies could possibly be a bit better than expected (which is attractive to the hot money), but we can not imagine that something serious happens on Wall Street and Europe not being thereby affected.
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