JPMorgan predicts European stock markets will struggle to produce positive returns next year as investors digest slowing economic growth across the continent. The forecast for 2024 comes from the same team of strategists that have, so far, accurately called the MSCI Eurozone’s performance this year. They expected the index to rise 9.1% to close at 256 points by the end of December 2023 on a local currency basis. The index is currently at 266 points. The Wall Street bank is maintaining the same price target for the end of 2024 — meaning no growth for the whole year — even if the euro zone countries avoid a recession. “We look for flat European [earnings per share] growth in 2024, based on no recession materializing,” said JPMorgan strategists led by Mislav Matejka in a note to clients on Nov. 29. “If economies enter contraction, then earnings will naturally fall outright.” The strategists outlined several key factors driving their analysis, including expectations for lower bond yields, stalling U.S. economic growth, and flat sales. Investors can access the index through the iShares MSCI Eurozone ETF . How will 2024 play out? The JPMorgan strategists believe stocks will sink in the first half of 2024 as markets factor in potential downward adjustments to earnings estimates. However, they see returns improving in the back half of next year if central banks halt interest rate hikes and begin cutting. “Given this, we think the backdrop for risky assets is set to be challenging in the 1H of 2024, with spells of material weakness, and could potentially improve thereafter,” the strategists added. The positives for 2024 In contrast to their outlook on the MSCI Eurozone index, the JPMorgan strategists are “overweight” on the U.K. market, seeing it as a “relative winner” if global equities struggle amid a murky growth outlook. They expect the FTSE 100 to close at 7,700 by the end of 2024 on a price index level, which does not include gains from dividends. .FTSE YTD line They believe high dividend yields, depressed valuations, and the inverse correlation between stock prices and the British pound will drive the index higher. On a sector level, JPMorgan is overweight on defensives like health care, consumer staples, and utilities, which should hold up better during periods of uncertainty. The bank is also positive on long-duration sectors such as real estate and communication services, expecting them to benefit from declining yields. — CNBC’s Michael Bloom contributed to this report.
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