2024-01-04 19:32:27
From the perspective of JP Morgan capital market expert Tilmann Galler, the past year was positive on both the stock and bond markets. “The expected recession did not occur. The markets have become more and more comfortable with a soft landing scenario and have now priced it in,” said Galler on Thursday during the presentation of the capital market outlook for 2024.
Inflation has fallen significantly in the USA and Europe, although not yet at its target, but economic growth is now weakening. “The sugar rush is coming to an end, we have to prepare for the fact that the momentum will weaken significantly,” said the expert. Government subsidy programs declined.
In the USA, the tailwind from consumption is declining
The increased real wages, on the other hand, should support consumption. “Purchasing power will continue to improve,” said Galler, especially with a view to Europe. In the USA, however, consumption has remained strong in the past despite rising prices, but this has also had an impact on savings. The savings surplus in America will be used up by the middle of the year. “The tailwind that was consumer spending in the U.S. is running out,” he said.
In Europe, however, fears of recession are significantly greater, so people have been holding on to their money. Great Britain is also plagued by economic concerns and the fear of no longer being able to refinance real estate. In the USA, the deficit has never been so high while at the same time there is almost full employment, warned Galler.
And further: “The financial policy challenges will become greater this year. You can no longer spend as much money as you did last year. “That will have consequences for the bond market,” he said. From the expert’s point of view, China’s economic weakness is also a reason why demand for goods on the world markets is not developing positively.
What this means for the capital market in 2024
The overall situation gives the central banks the opportunity to cut interest rates, although the extent is very questionable. “We do not see the case that the central banks will simply switch to interest rate cutting mode. Inflation has come down, but it hasn’t gone away,” he said. What does this mean for the investor? Investment grade corporate bonds remain attractive. The companies are still strong enough to continue to guarantee extra income compared to government bonds.
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On the stock market, however, Galler sees companies’ margins under pressure. From his point of view, there is an opportunity in Europe, Japan or even smaller stocks. “For example, defensive stocks, such as utilities, consumer goods or sometimes in the pharmaceutical sector – there you can find stocks that don’t have such high valuations and price tags,” he said. High-dividend stocks continue to be favored. They offer high quality.
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