Bank of America warns of fall in European markets at year-end

(Boursier.com) – Bank of America strategists are changing their minds on European equities. The macroeconomic backdrop is shifting from a ‘Goldilocks’ (“Goldilocks”) scenario – low inflation, optimal growth – to an “anti-Goldilocks” perspective, according to bank specialists, who downgrade their recommendation on the region’s stock markets to be ‘negative’. According to them, the Stoxx 600 index could fall 10% by the end of the year against a backdrop of slower economic growth and continued high inflation.

The index is already showing a drop of around 5% from its record in August, rising bond yields, fears related to the gradual reduction in asset purchases by the Fed and the ECB and risks linked to China which weighed on operators’ risk appetite.

BoA teams expect industries to suffer more from energy shortages, risks in the Chinese real estate sector and persistent constraints in the supply chain. “Current supply chain disruptions and skyrocketing energy prices are expected to keep inflation high,” says BoA, underweight automotive, financials and capital goods sectors .

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