In November, stock markets rose on both sides of the Atlantic, but unevenly. The EuroStoxx 600 ended up by +1.1%, while the S&P 500 in Euros surged by +8.8% and the Nasdaq performed even better with a +9.2% increase in Euros, between October 31st and November 29th.
The suspense of the American elections didn’t last long after all. The people have spoken and made a clear decision that has resolved the uncertainty we were all feeling. The Republicans have won across the board: the Oval Office, the Senate, and the House of Representatives. This means that the outlook for economic policy is somewhat clearer. It will be “America first” and everyone else will come after. The only uncertainty for each country is to what extent the American export market will be closed to them.
Donald Trump wasted no time in threatening substantial tariffs on China and Mexico, as well as, surprisingly, Canada. As future Treasury Secretary Scott Bessent puts it, the tariff gun will be constantly loaded and placed on the table for the next four years. On the other hand, Elon Musk has been tasked with implementing a drastic simplification of the federal government, which should notably reduce the bureaucratic constraints on businesses. The financial markets are therefore viewing this second mandate favorably for the American economy. The only downside remaining is the potential impact of these tariffs, which will undoubtedly affect the consumer and reduce their purchasing power. Inflation could also make a comeback if it turns out that the economy is overstimulated. However, at this stage, it is too early to draw conclusions on these subjects and the stock market has chosen to immediately digest the good news and potentially worry about the rest later. This is why the American indices are in good shape.
In Europe, the atmosphere is clearly gloomier. Uncertainties and threats are pressing: after the war in Ukraine, will Europe be left to face a threatening Putin on its own? Will the German industry resist the relentless Chinese competition? Will France be able to stabilize politically and implement a reasonable budget? Now, we must recognize that the signs are not encouraging with a Barnier budget that favors tax increases, which will not solve anything as they will only deteriorate the economy’s growth potential.
However, it is clear to us that there is a growing awareness of the seriousness of the situation in Europe. The Draghi report made an interesting diagnosis by highlighting that the inconsistency of the continent’s policies and overregulation are stifling innovation and start-ups. The only weakness is in the solutions it proposes with more public spending… when it would be better to imitate the Americans by allowing the private sector to innovate freely.
Before giving up on European stocks, it is important to emphasize that the continent and its businesses have their strengths, if they are willing to use them. As Warren Buffet wisely said, let’s be greedy when others are fearful because the worst is not always certain. The Clartan funds had mixed performances in November. Valeurs rose by +0.8%, Europe fell by -1.8%, and Ethos ended with a decrease of -2.4%. Flexible rose by +0.4%, as did Patrimoine.