(Finance) – The year ends with a better performance than was feared at first and with the promise of a turning point by central banks in 2024, a year that highlights interesting investment prospects for both equity and fixed income. This is what emerges from “The Globe”the publication on investment views of Eurizon (Intesa Sanpaolo Group)titled “A Not Bad 2023.”
The year – Eurizon notes – ends on momentum for the financial marketswith declining inflation and accommodative signals from the Central Banks: both the Fed and the ECB have left the unchanged rates in December meetings and Powell indicated that in optics
2024 the Fed may discuss lowering rates, while Lagarde said the topic is premature for the ECB.
Inflation is now within sight of the Central Banks’ objectives, having fallen to 3.1% in the USA and 2.4% in the Eurozone, but core inflation is still at 4% and 3.6% respectively, which is why so the Central Banks are in no hurry to let go on interest rates. The macro data – it is underlined – have confirmed that economic activity grows stably in the USA, having absorbed the post-Covid excesses without braking sharply. The slowdown is confirmed to be more evident for the Eurozone, which has been affected by the lack of re-acceleration of China and world trade.
Positive signals are coming from international tradestabilizing after two years of slowdown, and from China, which continues a moderate action to stimulate the economy. However, the macro impacts of geopolitical tensions in the Middle East and Ukraine remain modest. In this context, Eurizon’s view indicates that the first rate cuts are “possible around mid-2024”.
Looking at theasset allocationthe decline in inflation and the end of monetary restriction represent one favorable combination for bond marketsbut stabilization of interest rates will be a supporting factor also for risk assets (equities)in a context in which economic growth is slowing with no indications of recession.
On the front of the fixed incomethe overweight of US and German government bonds which present attractive maturity rates and are supported by expectations of rate cuts in 2024. But the end of monetary restriction is a positive news for spread bonds which feature historically interesting maturity rates and spreads.
As for theEquityEurizon experts believe that the stock market valuations they are interesting from a medium-term perspective and that the summer correction brought back the technical excesses accumulated before the summer. At a geographical level one is expressed preference for the USA and Europe.
On the front currencyfinally, it is believed that the strength of the US economygiven the slowdown in Europe, could be a reason for support for the dollarhowever compensated by a Fed that is currently less severe than the ECB.