Bank of America tracks full punch in stock rally

After an all-time great start, the European collective index Stoxx 600 will end the year at 452 points, according to a survey conducted by Bloomberg with 19 market analysts. This indicates a fall of 1.2 per cent from Wednesday’s closing price. The index contains 600 large, medium and small companies from 17 European countries.

Goldman Sachs strategist Sharon Bell is one of those predicting poor returns. The risk in the stock market is still high, she believes, and with prospects for lower earnings from the companies, bonds and cash are clear alternatives.

New Year’s rally

European shares have performed very well at the start of the new year. The Stoxx 600 is up 7 percent so far, and since the bottom in September the index is up 19 percent. It is 11 percentage points better than US stocks in local currency, according to Bloomberg.

Cyclical shares such as retail, travel, banks and technology have led the rise. Faster reopening of Chinese society after the corona wave has meant that fewer people fear an energy crisis, while there are signs that inflation is calming down. Economists are also more cautious in predicting recession in the economy.

If the forecasts of strategist Milla Savova at Bank of America are correct, the Stoxx 600 will fall by 20 percent to 365 points as we approach the middle of 2023. She nevertheless predicts a recovery to 430 points by the end of the year.

Indicates pause

Nordea Markets points out in a report that the upswing took a break this week, and that weak figures from the US gave a new spark to recession fears in the market. Profit hedging is probably also a reason for the fall.

Chinese stocks peaked in January 2021, and have fallen until recently. Recently, the Chinese market has made a strong comeback with a 50 percent rise in the Hang Seng index. However, Nordea believes that it is unlikely that Chinese shares will return to the top anytime soon, but that there are good reasons for a continued rise as the country is now opening up after the corona wave.

“The households have saved funds from the pandemic. It should support a fast retrieval. There is also an increased willingness to finance the troubled property sector,” they write.