The rate cut announced this Thursday, October 17 by the European Central Bank is bad news for the return on short-term savings. But certain investments will, conversely, become more attractive in the coming months.
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– What investments should you count on at the end of the year?
And three. The European Central Bank (ECB) announced this Thursday, October 17, a third cut in its key rates this year, after those of June and then September. Its main key rate, the deposit rate, is thus reduced by 0.25 points, and therefore rises to 3.25%. While this means that businesses and households will be able to borrow cheaper, it is on the other hand a hard blow for their short-term investments, such as super savings accounts or term accounts, because the yield on the latter mechanically erodes. with the fall in rates. Fortunately, the fall in the cost of money is also good news for riskier, longer-term investments.
Government and corporate bonds: coupons between 3% and 6%
If you already hold bonds, you are a winner with this new rate cut. Indeed, if you already hold bonds – via a securities account for example -, their value will automatically increase: following the ECB’s decision, the bonds which will now be issued will be with a yield (the “coupon”) lower than that of bonds previously placed on the market. It will therefore be possible to realize a potential capital gain by reselling your bonds in your portfolio.
And if you don’t yet have one, know that it is still possible to subscribe to one at attractive rates. Indeed, despite this new reduction in key rates, “we are far from returning to the period when rates were close to zero”recalls Nadine Trémollières, director of Primonial Portfolio Solutions. The obligation of the French State, for example, still remunerates 3% over a period of ten yearsand on the side of companies that go into debt, “we still find bonds at 4% for the safest and up to 6% for the least rated”points out Nadine Trémollières.
Equity markets: hope for renewed growth in activity
Good news is also on the horizon for the equity markets. Indeed, “when key rates fall, the cost of credit also falls, and businesses have more access to financing”explains Nadine Trémollières. In other words, companies should be able to finance their activity at lower costs to support their future growth. Result: an expected increase in dividends paid by listed companies, as well as an improvement in their valuation on the stock market. That is to say two additional levers of return for stock holders: both via the income received thanks to dividends, but also by soon reselling their shares if their value appreciates.
As for the sectors of activity to bet on, three of them should particularly benefit from the easing of rates, whether small or large caps: real estate , banks and infrastructure.
Real estate: good news for individuals and for stone-paper
Finally, the ECB’s monetary easing is obviously good news for individuals who wish to invest in real estate: the cost of their real estate loan will indeed fall in the coming weeks. And at the same time, the value of the property they are going to acquire should appreciate: when credit rates fall, the demand for housing increases, owners or developers therefore increase prices to capture the best possible offer.
The same phenomenon should be observed in the world of real estate investment companies (SCPI). The fall in rates should gradually increase the value of their real estate assets, made up mainly of professional properties. This is double good news. For new investors, first. If they choose their SCPI wisely, there are still good deals to be made by investing in companies whose buildings are currently discounted. And once the rise in prices is noted – SCPIs assess the value of their real estate portfolio twice a year – SCPI unit holders will be able to hope for a revaluation of their investment, with, as a result, an opportunity for added value. for resale.
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