(Finance) – Despite the powerful rally in November for the stock markets, EQUITY believes it to be “It is still advisable to proceed with caution in the short termas visibility into an optimal combination for markets of economic growth showing only a moderate slowdown, inflation under control, interest rates falling and corporate profits maintaining their strength still remains limited, even considering that the geopolitical variable has returned to play a significant role”. This is what we read from an analysis formed by Luigi De Bellis, co-head of the Research Office of the Italian investment bank.
De Bellis explains that the macroeconomic context is entering a slowdown phase, more evident in Europe and less pronounced in the USA at the moment, with the significant increase in interest rates which will progressively continue to produce its restrictive effects on the economy. The excess savings accumulated by families during the pandemic is decreasing, and the first signs of a weakening of the labor market are appearing. It is noted that businesses will face refinancing at increasing rates and therefore the chances of a downward revision of company estimates in the coming quarters are still considerable.
“The valuations in Europe seem reasonable, but the earnings estimates are optimistic in our opinion – we read in the research – In particular, the 2024E P/E of the Eurostoxx 600 index is 12.2x, with constant earnings expected YoY, while in the USA they appear less attractive ( P/E 18.7x with earnings expected to grow). In this scenario we continue to favor quality stocks over cyclical ones. We keep ours overall neutral positioning on equitiesas we believe that the positive effect on valuations resulting from the reduction in rates may be limited in the coming months by the slowdown of the economic cycle”.
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