The latest stock market gains will hold through the end of the year and survive a mid-year market correction, if central banks implement interest rate cuts later than investors have anticipated. currently integrated, says an economist.
Gains will remain in line with recent rebounds despite seasonal volatility, as markets may reprice to acclimate to a different rate cut trajectory from central banks, said Ludovic Subran, the firm’s chief economist. German financial services company Allianz, to CNBC’s “Squawk Box Europe”. Monday.
Investors are “expecting a huge pivot right now and they’re expecting a very early pivot,” Subran said, despite signs now suggesting a mid-year rate pivot from central banks, which could be lower than expected.
“That means significant volatility ahead, when people are going to reassess, but I also think that what we saw as gains from the latter part of ’23 and the beginning of ’24, will be there by the end of 2024. the year,” he continued.
European stocks saw a sharp rise in the final two months of 2023, lifting the regional Stoxx 600 index to an annual gain of 12.7%, according to LSEG data. The American S&P 500 index has been rising since the end of October and closed Friday above 5,000 for the first time on record.
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Stoxx 600 index.
Companies have reported a strong earnings season in recent weeks, with markets seeing only a slight shake in confidence as some central bankers backed away from rate cut expectations, particularly in Europe.
“I think it’s going to be very seasonal. So we’re going to maybe have a correction… Investors are going to see that the pivot is not going to be that huge because of the resilience of growth in the United States, or maybe- be because of inflation. rigidity in Europe,” Subran told CNBC.
“But I think by the end of the year we’ll have good stock market returns of 5 to 10%. And that’s pretty good, you know, for a year of normalization of everything else in the economy .”
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