Markets face the latter part of the year with moderate upside potential, with lower interest rates and an economic recession ruled out, but in a scenario not without risks due to geopolitical conflicts and the November elections in the United States, according to them. agree with analysts.
THE lower interest rates, control of inflation and prospect of a “soft landing” of the economy They create the basis for positive behavior of the markets, mainly in the United States, which will not be free of volatility, as has happened in recent months, due to geopolitical risks, mainly in the Middle East, and trade tensions between the United States. , and China.
In this sense, Bankinter analysts consider that “the market is functioning smoothly, despite the problems”and highlights “interesting” upside potential for the European stock market this year, which he places between 10 and 12%, while for the United States he estimates between 25 and 28%.
For Bankinter, what is really important is that the rate reduction process is globalexcept in Japan and Brazil, extending until December 2025 in the case of the ECB, estimating that it will apply its last reduction at its meeting on December 19, 2025, to end between 2.50% and 2.65 %, and until 2026 in the cases of the Bank of England (BoE) and the American Federal Reserve (Fed).
In the case of the BoE, Bankinter predicts that it will make its last reduction at its June 2026 meeting, down to 3.25%, while in the case of the Fed it estimates that the last reduction will take place on July 29 of the same year. . , until between 2.75% and 3%.
Regarding the fixed incomeBankinter is committed to providing high quality pro-bono sovereign and corporate credit, as is AllianzGI, which is shown “constructive and positive” on the profitability prospects of sovereign bonds, taking into account the current global macroeconomic and political context.
The global head of equity investments at Allianz GI, Virginie Maisonneuve, believes that as inflation and interest rates fallis likely to favor quality stocks as well as growth stocks.
Also believe “it is likely” that volatility will rebound in the latter part of the yearand even more so given the November elections in the United States, “so this could be a good time to take a hard look at some defensive positions to balance portfolios.”
The Director of Market Strategy and Consulting at Banca March, Joan Bonet, highlights that Central banks have “preventatively” started the path of lowering rates to cushion the economic slowdown, and for the moment “the classic deterioration of investment and consumption” is not observed.
Banca March is also committed to a “soft landing” of the economy, since the current cycle “it has certain particularities which make it less vulnerable” to previous ones, and has “the capacity to continue to resist”.
Bonet believes the Fed will make two further rate cutsstanding at 4.3% at the end of the year, while at the end of 2025 they will rise to 3.3%; In the case of the ECB, 3.2% is expected for this year and 2.2% for next year.
BlackRock analysts also believe that rate cuts by central banks “creating a favorable environment for stocks as we approach the end of 2024”but they point out that concerns about a remote “recession” scenario and expectations generated by companies immersed in artificial intelligence could generate “more volatility”.
Julius Baer believes that market volatility will remain high despite a favorable macroeconomic environment, and although the risk-reward profile for investing in cyclical stocks has become more compelling, they believe that “long-term investors should continue to bet on large-cap US growth stocks.”
In their outlook for the final months of the year, Bankinter analysts highlight technology, semiconductors, cybersecurity and healthtech as favored sectors, while Allianz Gl considers that Tech companies and small caps could well withstand a falling rate environment and moderate growth.
Banca March reports that “There is life beyond the magnificent 7” (Microsoft, Apple, Nvidia, Amazon, Alphabet, Meta and Tesla), which is why he sees great opportunities in energy-related companies and European small caps, betting on sectors such as technology, software or cybersecurity.
According to the manager Lazard, “small caps” help to diversify the risk of the portfolio, because it is an “attractive universe”, with a thousand companies in the euro zone, and they constitute a “source of diversification for large capitalizations and companies with strong economic returns”.
BlackRock also believes that small and medium-sized businesses are “attractive” given their cheap valuations and their propensity to benefit from falling interest rates.
