(31 JANUARY 2018)DAILY MARKET BRIEF 2:US stock markets down two days in a row

US stocks had a poor performance during the last two days, with a performance of -1.43% for Nikkei 225, -1.37% for Dow Jones and -1.09% for S&P500. This strong decrease is essentially correlated with rising oil production, announcements of health care competition on the US market and particularly worries that concern the ascending US treasuries U-curves. The decline was broad-based but particularly impacted (based on DJIA): Healthcare (-2.86%), Energy (-2.07%), Consumer Discretionary (-1.79%) and Information Technology (-1.30%).

With a +2.71% on the 10 years US Treasury notes (+0.66% since July 9th 2017) and +2.11% on the 2 year (+0.84% since July 9th 2017), the highest rate level since March 31st 2014, many investors and fund managers who rather look for income-based earnings have decided to trade up for a less volatile and risk-free investment, diminishing their equity exposure in the portfolio. 10 year US treasury and Bund differentials are now at +2.02% while UST and Japan lies at +2.6125.

USD is not following the trend and continues its depreciation against major currencies since January 9th 2018: EUR/USD +058%, GBP/USD +0.87%, JPY/USD +0.27%, USD/CHF -0.62%.

Though many investors tend to say that equity and commodity asset classes are going to suffer in the coming periods due to increasing attractiveness of Government bonds, we remain unconvinced that this will push out other investors than income-seeking bondholders or similar outside of equities for instance. We think that a more dovish Fed in 2018 will support risk, equities, commodities and US Treasury notes purchases.