For the director of Multi Asset management at Axa IM, the stock market dynamics of Apple, Amazon and other Microsoft companies will continue to be driven in 2024 by the powerful wave of artificial intelligence.
L’Express: The market anticipates an upcoming reduction in key rates by central banks: is this credible?
Laurent Clavel: One thing is certain: in the United States as in the euro zone, the peak in rates is behind us. The minutes of the latest monetary policy meeting of the Federal Reserve (Fed) show great unanimity on the fact that disinflation is well established, which opens the door to a possible reduction in interest rates. On the other hand, the market expects it from March 2024, which seems premature to us.
Could the start of the year be eventful?
Initially, we could witness a sequence of consolidation, following the excessive increase recorded in November and December 2023. This would manifest itself in a slight correction on the bond and stock markets. In this context, we tactically reduced our exposure to growth stocks – consumer discretionary, industrial, etc. – in favor of value – banks, public services… In the longer term, we are positive, both on stocks and on bonds.
What is your main conviction for 2024?
We favor stocks, particularly large American stocks. On the other hand, it still seems too early to us to return to small and mid-caps. These securities offer attractive entry points but their rebound is conditional on a sharp and rapid drop in rates.
Is it not too late to play tech, after the surge that these values experienced last year?
The phenomenon was particularly notable in the first half of 2023, where 90% of the increase was captured by 7 stocks [NDLR : Apple, Amazon, Microsoft, Alphabet, Meta, Tesla et Nvidia]. The progressions were more dispersed subsequently and their valuation does not seem excessive to us at this stage. We think it would be dangerous to be underweight on all of these stocks because the wave they represent is powerful. We believe in the potential of generative artificial intelligence. Currently, many companies operating in non-technological sectors are considering how to integrate this innovation to improve their productivity, which will generate investment spending favorable to the sector. Finally, artificial intelligence cannot grow without cloud computing, which is essentially based on three companies around the world [NDLR : Amazon, Microsoft et Google].
How do you position yourself on bonds?
We favor sovereign debt, which is sensitive to an increase in rates, because it offers protection in the event of a more pronounced economic slowdown than anticipated. Currently, the correlation is positive between stocks and sovereign bonds: when rates move, these two asset categories move in the same direction. But if the economic situation were to deteriorate significantly, the correlation would shift. This would cause a jump in volatility in stocks and rates would collapse. Sovereign bonds are a good way to protect against such a scenario. We favor those from the euro zone. We are less enthusiastic about credit [NDLR : les obligations d’entreprises]whose risk premiums we judge to be too low.
What factors could disrupt the markets?
The American elections, of course. The situation is different from that of 2016 because the consensus would rather be that Donald Trump would be elected. The surprise could come from a Democratic victory, which would likely lead to a decline in stocks and a move toward bonds. But the market will not be interested in it until the second half of the year. In the short term, it is the situation in the Middle East that must be monitored. A conflagration could create an upward shock to commodity prices, which would call into question the easing of monetary policy and the appetite for risky assets. At the end of 2023, we increased our exposure to commodities in the portfolios.
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