Goldman Sachs and BlackRock among those to warn against continued European share market gains
European stocks face a series of hurdles to extend their 2024 rally after hitting another record high this week, some of world’s biggest investors say.
Money managers at Goldman Sachs Group, BlackRock and Northern Trust Asset Management warn shareholders of European companies should be prepared for mounting risks from the region’s lacklustre economy and its impact on corporate earnings.
The US elections are adding an extra layer of uncertainty.
Markets are bracing for a volatile final quarter as a seemingly unstoppable rally in the first half has shifted into fluctuations of peaks and troughs over the past three months. And while China’s long-awaited stimulus measures could provide new momentum, the bar is high for equities to post meaningful gains.
Stocks are “sensitive at the moment,” said Helen Jewell, chief investment officer of fundamental equities for Europe, Middle East and Africa at BlackRock.
“The US election is incredibly difficult to call, and you’ve got uncertainty around the macro outlook. This fragile market is going to continue until we get visibility into 2025.”
A weak economic backdrop in Europe contrasts sharply with the region’s equity benchmark at an all-time high.
While fears of a global recession have eased as investors grow more confident about US growth, private-sector activity in the euro area shrank this month and forecasts indicate a looming contraction in Germany.
This week, Northern Trust cut its European allocation to neutral from overweight, citing the worrying macro outlook.
“The economic data is looking quite shaky,” Anwiti Bahuguna, chief investment officer of global allocation at the $1.2-trillion asset manager, told Bloomberg TV.
“Inflation is coming down, but not fast enough to think there would be very sharp relief on the rates front. It’s not a place to take a lot of risk.”
Third-quarter earnings, set to kick off in mid-October, will be crucial for assessing the impact of weaker growth on consumer demand.
In an early sign of how the season could unfold, a JPMorgan Chase & Co. analyst warned that Novo Nordisk A/S’s quarterly earnings could show slower-than-expected sales of its blockbuster weight-loss drugs Wegovy and Ozempic.
Investors are also second-guessing wagers on retailers after Sweden’s Hennes & Mauritz AB said it’s unlikely to meet a key profit target for the year.
Expectations for full-year earnings have declined about 2.8 per cent since January, according to data compiled by Bloomberg Intelligence. Still, some investors say even these estimates are too high, setting the stage for further downgrades.
“Our fund’s positioning is not very aggressive,” said Nicolas Simar, senior equity fund manager at Goldman Sachs Asset Management. “Short term, there’s little room for profits to improve substantially.”
Simar specifically warned about the outlook for consumer goods companies, which have been impacted by declining demand in key markets like China.
#Goldman #Sachs #BlackRock #among #warn #continued #European #share #market #gains