Global equity markets closed January 2024 positively after a “hesitant start”, with the US market leading the way and European markets also finishing high, according to data.
However, the composite purchasing manager’s index remained below the growth threshold of 50, according to data by Candriam. Meanwhile, the European Central Bank maintained steady rates and emphasised data dependence for future decisions, indicating an unlikely rate cut in March and a potential delay until summer, it added.
Equities outlook 2024: Key themes and macroeconomic trends
Large caps outperformed small caps, as long-term interest rates have been heading high so far. Growth stocks led again without a distinction between cyclicals and defensives.
IT, consumer discretionary and industrials were the top-performing sectors, with consumer staples outperforming the broader European market. Materials, energy and utilities struggled, particularly with rising long-term rates.
In earnings, Europe lagged behind the US. “Although only 20% of the companies in Europe have reported results so far, only 45% were able to beat earnings – the lowest figures since 2009 according to JP Morgan’s earnings tracker,” shared the team.
Q4 earnings growth is currently at -4% year-over-year, prompting analysts to further revise down their earnings expectations. Expectations for the next 12 months project a modest 4% growth, with energy and real estate weighing down averages and materials, industrials and healthcare poised for the highest growth.
UK investors pick global over UK and regional equities
“Even considering moderate earnings growth, European equity markets look quite attractive. They are still trading at the bottom of their historical range when looking at the 12-month forwards price-earnings ratio of below 13,” shared the team.
Despite a hesitant start, US equities closed positively in January, driven by economic data and Federal Reserve expectations. Large-cap and growth stocks outperformed, particularly in the technology and communication services sectors. However, materials and utilities struggled due to rising long-term rates.
Around 46% of S&P 500 companies have reported Q4 2023 earnings, with 72% exceeding expectations. Earnings growth stands at 1.6% year-on-year, with expectations for 10% growth in the next 12 months, shared the team. “The US equity market is currently trading at around 20 times expected earnings, which is above-average, but not yet overly excessive,” shared the firm.
January saw negative returns in emerging markets with economies like China, South Korea and Brazil underperforming. In contrast, India stood out positively, boosted by domestic investor enthusiasm and its rising stock market.
