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Equities: how much European markets will rise in 2024 according to Axa Im


Equities: how much European markets will rise in 2024 according to Axa Im By

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AuthorAlessandro BergonziStock Markets

Published Jan 19, 2024 11:41 – On the 2024 European stock markets “we are positive, we foresee a slowdown in growth but we believe that a recession can be avoided and we expect equity markets to return between 7 and 11%”, is the forecast of Gilles Guibout head of European equities at AXA Investment Managers.

However, warns the manager, while markets are already discounting the first rate cuts in March, “the risk of disappointment remains” should the easing of monetary tightening come later.

The positive sentiment on the cuts, ‘pushed up the performance of European indices in December, allowing equity markets to end 2023 on a high note,’ Guibout explains. “The turnaround,” he recalls, “had begun in November,” when investors, comforted by falling inflation and central banks’ statements, “had begun to bet on the end of the rate hike and to already foresee possible cuts more or less in the short term.

The wave of optimism gradually spread, ‘allowing several indices to approach or even exceed their historical records. But should this optimism turn out to be excessive, the markets would not be exempt from the risk of a disappointment,’ the expert reiterates.

European markets: cautious in the short term, but positive for 2024

From his point of view, Axa Im shares the view of a rate cut, but prefers to remain cautious, precisely because the markets are already discounting a cut for March and this may bring further volatility. But overall, Guibout is convinced that 2024 will be a good year for European stock markets.

Narrowing the time frame, in the coming weeks the analyst expects markets to show ‘a wait-and-see attitude until the first publication of annual corporate results. These results,’ he argues, ‘should provide insight into how much the economy has slowed and what companies expect this year.

After that, investors will focus on the growth outlook for 2024 and the risks of a slowdown for the European economy. ‘But even if a slowdown were to occur,’ Guibout assures us, ‘the market could be buoyed by an increase in valuation multiples if rates fall (today we pay 12.5 times earnings, the long average is closer to 13.5), combined with a slight increase in profits and a dividend of 3.5 per cent.’

Finally, according to the manager, small and mid cap stocks will continue to perform well this year, thanks to the end of the uptrend cycle ‘which for these companies means having visibility on refinancing costs’. Large caps, on the other hand, will be able to consider new opportunities for expansion, as for them ‘the end of the upturn means a resumption of M&A activity’.

Translated from Italian using DeepL.


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Equities: how much European markets will rise in 2024 according to Axa Im

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