In a challenging market environment, Deutsche Bank sees opportunities for investors in 2024.
It should be a good year for stocks and bonds thanks to interest rate cuts. “The synchronization of the two asset classes could continue for a while: we expect high single-digit returns by the end of 2024,” said the chief investment strategist for private and corporate customers, Ulrich Stephan, on Tuesday in Frankfurt as part of a capital market outlook.
However, investors should be aware of the numerous risks, such as wars, monetary policy and fragile economy. Because economically the conditions will probably remain difficult. According to the bank, global economic growth is likely to slow to 2.6 percent in the new year – and thus to a level that roughly corresponds to the usually assumed recession threshold.
In the Eurozone There is likely to be only a slight increase in gross domestic product, while experts for Germany assume a shrinkage of 0.2 percent. Economists have lowered their forecast following the latest Constitutional Court ruling. “Although the federal government has yet to make financial policy adjustments, economic policy uncertainty and spending cuts are likely to reduce growth by around half a percentage point in 2024,” said chief economist Stefan Schneider.
The timing of the first assumed interest rate cuts over the course of the year, as well as the election results, are likely to be of greater market relevance. Because 2024 will be the “biggest election year in history,” the experts emphasized, among other reasons US election in November.
Experts see interest rate cuts in the USA and the Eurozone from the middle of the year, which has recently been mentioned as an expectation on the market. In the USA they expect a reduction of 1.75 percentage points to 3.50 to 3.75 percent by the end of the year. In the Eurozone they assume a deposit rate of one point to three percent.
The development of the inflation rate is likely to be a decisive factor in the potential for interest rate reductions. “The central banks will have to worry about inflation for a long time,” warned Schneider. He sees good reasons why price increases will not permanently fall below the two percent target. These included expansionary financial policy, low investment, a worsening labor shortage and the energy transition, which would be expensive for the economy.
Transferring all of these assumptions into stocks, the year should be good. “We see an upward potential of almost ten percent, because company profits are likely to increase in 2024,” said Stephan in a global context. However, the trees in this country will probably not grow into the sky, as his emphasis shows that the profit estimates for Germany implied by the market are too high.
Deutsche Bank assumes that the DAX will rise to 16,600 points in 2024. In a historical context, this is a relatively small increase, but promises to be close to a record high. From an industry perspective, Stephan sees the financial sector as a good choice because of persistently high interest rates. With more risk, you can rely on banks and more conservatively on insurance. In general, he recommends value stocks with valuations that are significantly lower in Europe than in the USA.
Stephan also finds the US technology sector to be relatively promising. The expert expects the leading US index NASDAQ 100 to be at 17,000 points at the end of 2024, 6.5 percent higher than currently.
There is probably no way around the “magnificent seven,” he said, referring to the big tech giants Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla.
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FRANKFURT (dpa-AFX)
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