Hitting rock bottom only looks like a positive after a rebound. There are hopes in equity markets that 2023 served as both a trough and basis for a boost to valuations this year, at least on this side of the Atlantic. The end-of-year rally already put a spring in the step of some markets, thanks to what analysts at Bank of America (BofA) described as the “Goldilocks scenario” – the idea that the economy will slow enough for central bankers to repeatedly cut rates but not by so much that an ensuing recession flattens corporate earnings.
Goldman Sachs this week also reiterated its view that most major economies should avoid a recession this year, with a “meaningful acceleration” expected in real income growth in the UK.
Although Liberum warned that higher wages drove a slump in corporate profits in the second half of last year given companies’ limited pricing power, they remain bullish on the mid- to long-term outlook for UK and European shares, given their low starting point.