Too optimistic. This is how Bank of America defines the ‘acceleration’ that the stock markets of the Old Continent have experienced since the beginning of the year. After a turbulent 2022, equities have reaped gains in the first weeks, a situation in which the firm’s chief economist for Europe, Rubén Segura-Cayuela, urges caution. Specifically, the American group expects a correction of up to 15% compared to the expected behavior in world equities, a figure that can reach 20% in the case of the Euro Stoxx 600. “The new normal has yet to be defined,” he says. he.
The main European indices have registered revaluations since last January 2. Among them, the Italian FTSE MIB stands out, which revalued up to 8.7%, followed by the French CAC or the Ibex 35, which both recorded an increase of 8%. The German Dax, for its part, registers an advance of 7.57%. Although they come from suffering big falls during the past year. The increases are much higher than the New York stock market, where the Nasdaq accumulates a rise of 3.6%, the S&P500 1.55%, while the Dow Jones has fallen 0.31%.
Segura-Cayuela has emphasized that the central banks are going to continue with their restrictive monetary policy plan, which in practice means more rate hikes, at least up to 3.5% by the beginning of June of this year and it will not be until a year later when it starts with rate reductions, according to BofA. “The ECB faced a ‘shock’ of supply in a context of a much less overheated economy than the American one, and where the response should be different in terms of rates,” she points out.
Although he warned that the eurozone faces different risks, including the energy crisis, he does not foresee a recession in the single currency region. However, the current context of weakness will lead it to grow around 0.4% in 2023 and 0.9% in 2024, while reducing the inflation forecast to 5.2% this year. “There has been too much pessimism about the winter and now there is too much optimism about what will happen after it,” he remarks, while focusing on the importance of analyzing the percentage of supply
Seguro-Cayuela, on the other hand, does anticipate a technical recession in the United States throughout the second part of the year. In the case of the United States, the risk occurs because the Federal Reserve is forced to raise rates more than expected or delay the decreases longer than expected. Prices are already showing signs of moderation, with reductions of around 3-4%, so now, the second battle of the central banks lies in their ability to place it below their target (2%), something that is unlikely to come until after 2025.