2024-01-14 06:15:00
Le Point: How to explain the stock market rally since November?
Patrice Gautry* : There are at least three reasons. First, the soft landing of the American economy. The specter of recession is receding. We even see this economy accelerating once more at the end of 2024 and the beginning of 2025, driven by an accommodating budgetary policy, more focused than in the past towards investments in new technologies and the energy transition. Then, this is due to disinflation in Europe, but also across the Atlantic. We are getting closer to the 2% objective, with an expected rate of 2.5% in the euro zone and 3% in the United States at the end of 2024, which leads us to believe that the cycle of rate cuts – c This is the third explanation – will be triggered in the second semester.
The rise in the markets last year was concentrated in seven stocks. The rally observed since November may extend to those who have not yet benefited from it. 2023 was a bad year in terms of earnings growth, and 2024 will be better, although we think the consensus is a little too high. We are counting on an increase in profits, not of 10 but of 7%. For the whole of 2024, we anticipate an increase in shares of around 10%.
Does this mean that we need to strengthen our position on stocks?
You have to remain careful. What is certain is that we must remain invested, but we prefer to strengthen ourselves thanks to the corrections. The market will remain volatile due to uncertainties weighing on growth and competition from bond investments, which should yield 4 to 4.5% on quality bonds and 7 to 8% on lower rated securities. We therefore consider that convertible bonds offer opportunities. They benefit from the rise in rates and the progression of their underlying assets. Conversely, the need to be very reactive to developments leads us to be more reserved regarding thematic funds which involve longer-term management.
What values do you favor?
Growth stocks, creating long-term value, with solid fundamentals, and tech, through stocks present in software, software and the cloud, which will benefit from the explosion of artificial intelligence. Geographically, we remain strongly positioned on American stocks which will benefit first from the resumption of growth. We have become positive once more regarding Japan, with Japanese companies benefiting from improved margins and expected M&A deals. Finally, we are interested in India, which is benefiting from the relocation of a certain number of activities formerly in China, even if it remains difficult to invest there. On the other hand, we are cautious regarding China. Gold might provide protection in the event of geopolitical risks and in the event of a new Trump presidency in 2025.
* Chief economist at the Union Bancaire Privée (UBP).
The Quantalys Harvest group awarded its Awards to the best European management companies with more than 5 billion assets under management according to the performance of their funds since 1is January 2023 in the chosen category.
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