Eurizon’s options on how to invest

2023 it hasn’t been an “accio accio” year and it ends with a better performance than expected, thanks to the rally achieved by the markets in the last quarter. A change of pace by central banks offers some ideas for choosing how to divide the portfolio in 2024. Some ideas came from “The Globe”, the monthly publication of Eurizon (Intesa Sanpaolo Group) entitled “A not bad 2023”.

The economic scenario

The year – notes the management company – ends on momentum for the markets financial markets, with falling inflation and accommodating signals from the Central Banks: both the Fed and the ECB left rates unchanged in their December meetings. Powell indicated that with a view to 2024 the Fed could discuss lowering rateswhile Lagarde said the issue is premature for the ECB.

Inflation is now within sight of targets of the Central Banks, having fallen to 3.1% in the USA and 2.4% in the Eurozone, but core inflation is still at 4% and 3.6% respectively, which is why the Central Banks are in no hurry to let go of interest rates.

The macro data – it is underlined – confirmed that theEconomic activity is growing steadily in the USA, having absorbed the post-Covid excesses without braking abruptly. The slowdown is confirmed to be more evident for the Eurozone, which has been affected by the lack of re-acceleration of China and world trade. Positive signals are coming from international trade, stabilizing after two years of slowdown, and by China, which continues a moderate action to stimulate the economy. However, the macro impacts of geopolitical tensions in the Middle East and Ukraine remain modest.

First rate cuts in mid-2024

In this framework, Eurizon’s view indicates that i first rate cuts I am “possible around mid-2024”. In terms of asset allocation, falling inflation and the end of monetary tightening are a combination favorable for bond marketsbut stabilization of interest rates will be a supporting factor also for risk assets (equities)in a context in which economic growth is slowing with no indications of recession.

Stocks, bonds and…

On the front of the fixed incomethe overweight of US government bonds and Germany which feature attractive maturity rates and are supported by expectations of rate cuts in 2024. But the end of monetary restriction is positive news for spread bonds which feature historically attractive maturity rates and spreads.

As for theEquityEurizon experts believe that stock market valuations are interesting from a medium-term perspective and that the summer correction brought back the technical excesses accumulated before the summer. At a geographical level, a preference is expressed for the USA and Europe.

On the front currencyfinally, it is believed that the strength of the US economy, in the face of the slowdown in Europe, could be a reason for support for the dollarhowever compensated by a Fed that is currently less severe than the ECB.