Could the tides be turning in the global equities market? According to Pictet Wealth Management, 2024 might see a significant shift with European stocks potentially outperforming their U.S. counterparts in terms of cash returns to shareholders. It’s an intriguing forecast that suggests a changing landscape for investors who traditionally looked towards the U.S. for high shareholder yield.
As we edge towards the end of the year, the STOXX Europe 600 index remains buoyant, while U.S. stock futures have shown a slight ease. Pictet’s analysis points to a higher expected cash return from European equities in 2024, a blend of an estimated 3.9% dividend yield and an encouraging 1.5% from stock buybacks, culminating in a possible 5.4% return to shareholders. In comparison, the forecast for the U.S. and Japan hovers around a more modest 3.4%.
This upbeat outlook for Europe is underscored by end-of-year rallies that have nudged equity indices towards, or even beyond, Pictet’s end-2024 price targets. The resilience of equity valuations has been somewhat surprising, especially given the backdrop of persistent inflationary pressures. Yet, Pictet anticipates that the 12-month forward price-earnings ratio (PER) will stay elevated across major markets, including a high 18x for the S&P 500, 12x for the Stoxx Europe 600, and 14x for TOPIX.
What’s propping up these valuations? Pictet identifies two primary factors: consistent earnings momentum and a scheduled agenda for refinancing debts. With a conservative projection of mid-single-digit earnings per share (EPS) growth for developed-market equities in the next year, Pictet’s stance is less optimistic than the consensus but still reflects a positive outlook.
In recent market news, we’ve observed Telefonica experiencing a surge as the Spanish government moves to purchase a stake, hinting at increased confidence from state-backed investments. On a less positive note, the biotech firm Argenx saw its shares tumble after a failed drug study, showcasing the volatile nature of the pharmaceutical sector and its impact on stock performance.
Considering these variables, European equities could become a lucrative avenue for investors searching for yield in the coming year. The forecasted cash returns signify not just a potential monetary gain but also an emblematic shift in where global financial power might be leaning.
For those keeping a close eye on the markets, the evolving dynamics between U.S. and European stocks present opportunities for a strategic re-evaluation of investment portfolios. As we approach 2024, staying abreast of these trends will be crucial for capitalizing on prospective shifts in global equity performance.
We welcome our readers at Best Small Venture to join the conversation and consider the implications of these forecasts on their investment strategies. What does this mean for your portfolio, and how might you adapt your approach in light of these predictions? Share your thoughts and questions with us, and let’s delve deeper into these market trends together.
In conclusion, while past performance is not indicative of future results, these insights from Pictet Wealth Management paint a hopeful picture for European equities. As savvy investors and market enthusiasts, we should remain attuned to these forecasts and position ourselves to benefit from the unfolding economic narrative.
What’s your take on this? Let’s know about your thoughts in the comments below!
