Norbolsa, the investment arm of Kutxabank, has shifted its focus toward equities in several key sectors, including infrastructure, energy, utilities, food, technology, telecommunications, and luxury. This stance emerges from a market outlook report published by the firm. The analysis shows a neutral position on sectors such as insurance, banking, pharmaceuticals, tourism, and real estate, while adopting a cautious stance on industrial stocks, automotive, and retail. The move reflects a belief that certain areas of the economy offer more favorable risk-adjusted returns in the near term.
Norbolsa also outlined recent changes to its model equity portfolio. Notable adjustments include the removal of BNP Paribas, Nestlé, and Mercedes, making room for MedioBanca, Cie Automotive, Carlsberg, and Merlin Properties. The firm notes that the economy demonstrated notable resilience in the first half of 2024, particularly in the United States, with European conditions gradually improving over the following months.
As a result, Norbolsa anticipates that equities will receive support from corporate earnings in the coming months, with expected upward revisions to the current consensus for earnings per share in Europe. On inflation, analysts believe disinflation has progressed in both regions, albeit with greater confidence in the euro area than in the United States. The final mile of lowering inflation toward single-digit targets faces hurdles, including strong services demand and ongoing housing-market tensions. Overall, however, the firm remains optimistic about policy direction.
The European Central Bank is expected to implement another rate cut in the near term, potentially reducing rates to around 4%. The Federal Reserve could follow with a modest cut, placing rates in a 5.0% to 5.25% range. Historically, the start of a rate-cut cycle by the ECB has coincided with positive stock-market performance over the next twelve months, according to Norbolsa’s analysis.
Moreover, a broader upturn in market tone across sectors is typically observed with the easing of monetary conditions, which could help reduce concentration risks in technology and encourage more balanced participation across industries. In addition, a rise in mergers and acquisitions activity, along with the potential return of capital flows to Europe, is seen as a supportive factor for stock markets.
Regarding risks, the primary concern for Norbolsa revolves around the possibility of higher-than-expected inflation, which could compel the Federal Reserve to delay further rate reductions and create abrupt economic adjustments. The onset of the United States political campaign is likely to introduce higher volatility in financial markets during the last quarter of the year, while forthcoming developments in France could also influence near-term market sentiment.
The overall message from Norbolsa emphasizes cautious optimism. The forecast sees a favorable environment for equities driven by improving macro data, resilient corporate earnings, and supportive monetary policy, tempered by inflation dynamics and political developments that could alter the rhythm of the markets. This blend of factors suggests a constructive, but carefully monitored, trajectory for global equities in the months ahead. [Attribution: Norbolsa market-perspectives report, 2024.]