03-26-2024 · Insight

Equity outlook: Building on momentum

The proverbial ‘wall of worry' looks less daunting as we enter Q2 with the US economy continuing to show resilience and Europe’s economy appearing to have bottomed and inflation down, if not out.

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    Authors

  • Kees Verbaas - Global Head of Fundamental Equity

    Kees Verbaas

    Global Head of Fundamental Equity

  • Audrey Kaplan - Lead Portfolio Manager

    Audrey Kaplan

    Lead Portfolio Manager

  • Wim-Hein Pals - Head of Emerging Markets team

    Wim-Hein Pals

    Head of Emerging Markets team


At the end of last year this seemed to be an equity bull market running on euphoria over AI but this quarter broader strength has developed, as we hoped it would, with record index highs being hit in Europe also.

The view that there will be a sting-in-the-tail of higher rates or that the weak commercial property sector will drag the financial system, and then the wider economy, into a slump, is now a minority one. It’s so far, so good in 2024, and the market is raising year-end targets. We are now about to move into the dovish period of the cycle, albeit it at a slower pace than anticipated by investors. The recent interest rate cut by the Swiss central bank confirms that view.

In emerging markets, many central banks are lowering interest rates. Brazil for instance passed its sixth cut already. With inflation falling in tandem, it allows even more room for policy relaxation. Is this all too good to be true? We don’t think so, and believe emerging markets can do really well this year.

Looking at the global election cycle from a financial markets’ point of view, it’s all been smooth so far and in Q2 we don’t expect any surprise from India either. Of course the big one all investors are watching is in November in the US. Whoever wins, the stock market promises a good place to be with both Biden and Trump likely to pursue expansionary fiscal policies into a monetary easing cycle. That makes any coming correction, even a steep one, look like an opportunity.

In this edition of our Quarterly we give you our outlook for developed and emerging markets, an interview with our European Stars strategy lead Mathias Büeler, perspective on two Industrials conferences in Miami, a primer on transition finance, a contrarian view on Japan real estate, and we introduce our new Emerging Markets ex-China strategy. Enjoy!

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