The chief economist at German financial services firm Allianz is optimistic that the latest stock gains will hold until the end of the year, even in the face of potential mid-year market corrections. Ludovic Subran believes that this positive trajectory will continue if central banks delay implementing interest rate cuts beyond what investors are currently expecting. He foresees markets re-pricing and acclimating to a different rate cut trajectory from central banks, which could result in substantial volatility but ultimately lead to gains by the end of the year. European and U.S. stock markets have seen significant gains in recent months, with signs of a solid earnings season providing resilience in the face of potential rate cut expectations.
Subran expects some seasonal volatility and potential corrections, but he remains confident that the gains from the latter part of 2023 and early 2024 will persist and even grow by the end of the year. He attributes this to growth resilience in the U.S. and inflation stickiness in Europe. According to him, investors may “see that pivoting is not going to be so huge because of growth resilience in the U.S., or maybe because of inflation stickiness in Europe.” Overall, Subran anticipates a positive 5-10% equity return by the end of the year, optimistic about the potential for good returns in a year of economic normalization.