Between the European elections and the ECB meeting, the beginning of June is likely to be a turbulent month for the European markets. The European elections take place on 9 June, and the next ECB meeting will be held on 6 June. With the economic and geopolitical situation still tense, investors are eagerly awaiting the ECB's decisions on rate cuts. As mentioned in the article of 5 April 2024, despite falling inflation and a stabilising economy, central bankers remain wary of rushing ahead.

What impact could the European elections have?

In general, these elections do not have a significant impact on the markets, but this year, with the geopolitical situation so tense, certain types of stocks could see fluctuations. Energy stocks are the most likely to be affected by the elections. Energy is the major issue of the moment, and with Europe aiming to be carbon neutral by 2050, much greater investment is needed. The elections will therefore put the subject back on the table and potentially have an influence on these securities.

What are the central banks' visions?

Clearly, in the medium term, central banks are not planning to cut rates drastically. According to Philip Lane, the ECB's chief economist, they must continue to remain restrictive throughout the year, and the question will be to decide how quickly the restrictions on key rates can be lifted.

As inflation is not yet fully under control, due in particular to the energy and oil sectors, which have been the main inflationary factors in recent years, a premature cut in rates too steeply could rekindle inflation.

In the short term, the situation is clearer and economic agents are expecting rates to fall slightly. According to the ECB's chief economist, the time has come to reduce but not eliminate the tight restrictions, hence his medium-term vision. The situation is still not stable enough to begin a significant rate cut in 2024.

The ECB and the FED: parting ways?

Normally, the ECB and the FED always follow similar paths in their decisions on interest rates. But this June, that could change. While the ECB is beginning to want to lower certain restrictions, the FED is considering raising rates for fear of a resurgence in inflation. This divergence could potentially have an impact on the markets.

In this unstable situation, markets are complicated to understand and volatility can be high. Adopting secure asset management is of the utmost importance. The financial market professionals at Wealth A7 are here to help you with all your investments. Contact us!

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