The starting position for 2024 appears to be more favorable compared to the previous year, even there are still significant challenges. Inflation is showing signs of weakening but has not yet been finally contained. Monetary policy remains very restrictive, and the economic environment appears somewhat uncertain, exacerbated by mounting geopolitical risks. In addition, the super election year 2024 will influence stock market activity.
Enthusiasm for artificial intelligence (AI) has triggered a rally in US tech stocks, which has boosted the equity market since last year. So far, corporate profits and margins have been able to withstand higher interest rates and costs and continue to provide support. Economic growth in the USA has also surprised on the upside. The US labor market continues to be extremely strong and consumer spending has been robust. In Europe, on the other hand, weak consumption and stagnating productivity weighed on the economic data.
Fiscal policy on both sides of the Atlantic will remain expansive in the medium term due to the multi-year stimulus programs such as the JOBS, Inflation Reduction or CHIPS & Science Act in the US or the Next Generation EU Program in Europe. Strong tailwinds also come from Japan. Japanese equities have recently been driven by the central bank's zero interest rate policy and the weakness of the Japanese yen. The strongly export-orientated Japanese companies are well positioned to benefit from the structural growth opportunities in the Asian region. In this environment, the ATX Index developed in line with the international stock market environment. Banks in particular (Erste, Bawag, RBI) showed strongly positive developments. In addition to the reporting season, topics such as the planned merger of the OMV subsidiary Borealis with ADNOC/Borealis JV Borouge dominated the headlines.
As long as the prospect of a soft landing for the economy dominates, the environment for risky asset classes such as equities remains constructive.
Gabriela Tinti, CPM
Erste Asset Management GmbH – Member of Erste Group
Head of Desk Equities AT
2 February 2024
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