Equity market outlook 2024

The fall in long-term interest rates that started in autumn 2023 has led to a reversal and a new rise in the stock market. Investors expect central banks to start cutting policy rates in the first half of this year. Comments from central banks on interest rates and inflation will keep markets volatile during the first part of the year. We are also likely to see volatility caused by geopolitics, for example in oil prices and freight rates. Overall, however, the outlook for the equity market is positive. This is driven by factors such as improving corporate earnings growth after a challenging previous year, easing interest rate and inflationary pressures, and reasonable valuations.

The outlook for Finnish equity markets has improved, in line with other Western equity markets. A large part of our companies operate globally, and Europe and China, which are important markets for us, are currently experiencing rather weak growth. The impact of falling interest rates, among other factors, is easing consumer distress, alleviating recessionary pressures – especially in the US, where the upward revision of economic growth forecasts has, in fact, been taking place for some time. In Finland, equity valuations are reasonable, and the Helsinki stock exchange is offering a dividend yield of up to around 5% and earnings growth of 8% this year. In the short term, the Helsinki stock exchange has been lagging behind the rest of Europe, but in the long term, Finland has been a good place to invest and we have done better on average than the European markets.

European equity markets are characterised by the heavy weight of the banking sector. Banks have been making huge profits from interest margins fattened by rising interest rates. With regard to the margin, the strongest earnings leverage is probably starting to be behind us, and the general economic situation should see an increase in credit losses. Otherwise, Europe, like Finland, is an export-dependent economy, and the faltering of the Chinese economy is also reflected in Europe. But European equity market valuations are also subdued and prices are in well into negative in many sectors, such as automotive, chemicals and banking. This, combined with 5% earnings growth and a dividend yield of around 3%, makes European equities look very attractive.

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The information presented is based on UB’s own estimates and sources considered reliable by UB. The information on which the conclusions are based may change quickly and UB Group may revise its market view without prior notice. No information obtained through this presentation should be construed as a solicitation to invest. When making investment decisions, readers should base their decisions on their own assessment of the investment and the risks involved, and to consider their personal goals and financial situation.

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