- In early March, the pandemic caused the collapse of stock market values all over the world.
- Taking advantage of this drop in share prices, many individuals have decided to invest.
- Experts warn against such practices if the intention is to gain short-term capital gains. Especially since the outlook in the coming months is particularly uncertain.
After having unscrewed with the Covid-19 pandemic, the stock markets began their recovery. Since early June, the CAC 40 index has been flirting with the 5,000 point bar. It is still far from the more than 6,100 on February 19, but better than on March 18, when the price had bottomed out, at 3,754 points. Betting on a rebound, many individuals began to invest, smelling capital gains. In late April, the authority of the financial markets had spotted the trend, noting that more than 150,000 new investors had, for the first time, bought shares of SBF 120 in March, then multiplying by three the purchases of shares.
But is going public now really a good idea? Some specialized magazines provide it and already detail how to proceed. "It's time to invest in the stock market," even launched, on March 10, the Secretary of State to the Minister of Economy Agnès Pannier-Runacher, causing controversy. In fact, "if we bought at 4,000 and sold at 5,000, we won," observes Alexandre Garel, teacher-researcher in finance at Audencia Business School.
Good deals in Europe
Except that "the accounts that were opened during the month of March have not withdrawn their stake," explains Andrea Tueni, director of customer relations at the broker Saxo Bank, which offers its clients to invest in the stock market. He also observed, even after the deconfinement, "a substantial number of investors who wish to position themselves on the markets". Confined to their homes, they had time to take stock of their finances. A situation which, according to this broker, would also have favored investments on the stock market.
These investors are waiting for prices to rise in Europe, where the markets "are still down," he said. In the United States, the markets have recovered dramatically thanks to the US Federal Reserve. It has already supported the US economy with 10% of US GDP, or about 2.3 trillion dollars. However, Andrea Tueni urges caution.
“Erratic” markets
And for good reason, the markets are "erratic", guided by two opposing forces. On the one hand, there are the measures taken by governments, which encourage optimism among investors. But on the other, the uncertainty linked to the pandemic, which the markets take into account in the absence of a vaccine.
Also, the prospect of a “V” recovery - a sharp fall followed by an equivalent rebound - convinces less and less in months. Some studies on the economic consequences of previous pandemics show "that there are consequences for investment and savings behavior that can last for several decades," explains Christopher Dembik, chief economist at Saxo Bank. He is not "particularly optimistic" also given the course of the recovery in Asia, which is a few weeks ahead of Europe. There, "we are roughly speaking of a resumption of international trade in" L ", extremely gradual", with a still weak demand as shown by the prices of raw materials, explains the economist.
Regarding Europe, "we will be penalized by a lack of ambition on the side of budgetary policies", continues Christopher Dembik. According to him, the recovery plan of the European Commission of 750 billion euros, whose subsidies should be paid between 2023 and 2024, will come too late. As for European budgets intended to strengthen the European economy, "at best you will have 0.08% of European GDP per year [which will be devoted to it]", which is insufficient.
Bad News Possible Back to School
If for the moment, the markets are up, the situation could change at the start of the school year with the announcement of bankruptcies, restructuring and increases in unemployment. "A new phase of decline can not be excluded, prompted by a possible resumption of the pandemic or massive downward revisions of corporate profits in 2020", also highlights the Banque de France in its report published on June 23.
In short, to invest, "you have to be ready so that this money cannot be mobilized and remain long and diversified", that is to say over periods of ten to twenty years, recalls Alexandre Garel. Especially since the traps exist. "Compared to professionals, individuals tend to take their earnings earlier, but also to keep their losing positions longer," explains the teacher-researcher. He therefore warns those who would like to play smart. Especially since in the short term, it is "unlikely that individuals will have better information" than specialists who are more experienced in the exercise.
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In the short, medium or long term, what savings and investment strategy should be adopted?
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