The global economic landscape has recently become more optimistic, leading to increased investor confidence, especially in the stock markets.
UBS analysts have highlighted positive economic indicators from the United States, proactive stimulus measures from China, and the potential for global interest rate reductions as factors contributing to this optimism.
In the United States, economic data shows a resilient job market and stable economic growth, with an average annual growth rate of 2.5% since 2019. Inflationary pressures are also easing, moving closer to the Federal Reserve's target of 2%. This aligns with the Fed's approach of maintaining strong economic activity despite previous interest rate hikes.
Chinese officials have implemented stimulus measures to revive their economy, and there is anticipation of further support measures. The Chinese central bank, along with other global policymakers, has started to lower borrowing costs, indicating a shift towards a more accommodative monetary policy environment. This is expected to reduce growth uncertainty and benefit small- and mid-cap equities in Europe.
UBS analysts have identified opportunities in the US technology sector, particularly in relation to artificial intelligence. They believe that technology companies are well-positioned to capitalize on this trend and attract investor interest. Additionally, Asian markets, excluding Japan, are expected to achieve strong earnings growth, making them an attractive investment destination.
Another point of interest is the expected recovery of European small- and mid-cap equities, which have underperformed compared to large caps in recent years. As interest rates decline and refinancing costs ease, these smaller companies are expected to benefit. This is likely to enhance investor confidence and lead to increased interest in these equities.
As the global economic landscape evolves, it is important for investors to consider the interplay between monetary policy, economic data, and market sentiment. By navigating these complexities, there is potential for substantial returns in the coming year.