This week, banking giant J.P. Morgan releases its annual Mid-Year Outlook for June and is one of the last ‘big banks’ to do so.
On June 6th, Citigroup’s Citi Wealth released its mid-year outlook for 2024: ‘renewed growth, new challenges’, while Morgan Stanley released their own outlook on May 29th.
Now that the views are in, we thought we’d summarize the outlooks for you, so you can see what banks thoughts are on the markets’ outlook for the next six months.
The top 4 themes for banks’ mid-year outlooks:
- Bullish on global growth
- Even more bullish on global equities
- A September US rate cut
- Continued focus on semiconductor stocks and AI in general
1. Bullish on global growth
The big banks seem to think that, overall, the global economy has been in a god space since the start of 2024, with that likely to broadly continue.
“At Citi Wealth, we were more optimistic than many entering this year, particularly those forecasting recession. However, the renewed expansion has gathered pace even sooner than we might have expected.”
Citi Wealth went on to say that:
The global economy has surprised to the upside in the first half of 2024… We now forecast global growth of 2.6% for this year as a whole and 2.9% in 2025”
2. Even more bullish on global equities
If banks are optimistic about global growth overall, they seem downright evangelical about global equities in particular outperforming for the remainder of the year.
In its ‘How have our views played out in 2024?’ outlook, released on June 7th, J.P. Morgan said that “we continue to see potential double-digit upside for global equities over the next year.”
Morgan Stanley provided a little more specifics, saying that:
Morgan Stanley Research sees global equities bringing positive returns this year, helped by the macroeconomic environment and the potential for increases in corporate earnings. In standout Japan, returns potentially could reach 17% while European stocks could reach 18%.”
3. A September US rate cut
The long-awaited first interest rate cut from the United States’ Federal Reserve has been taunting markets for some time.
But banks seem to think it’s somewhat nearer on the horizon. Specifically? Around September 2024.
“The European Central Bank is likely to start cutting in June, the Bank of England in August with the U.S. Federal Reserve predicted to follow in September,” said Morgan Stanley in its analysis.
Meanwhile, J.P. Morgan said that market expectations are moving back and forth between Fed rate cuts starting in September or December. However, it did also say that:
The global easing cycle is already well underway, with the Bank of Canada and European Central Bank both lowering policy rates this week. That means it is time to move out of excess cash and into asset classes that tend to perform better when interest rates are falling.”
4. Continued focus on semiconductor stocks and AI in general
The power of investing in semiconductors came up more than you may expect throughout the banks’ forecasts, driven largely by the rise and rise of AI bullishness in the market.
Citigroup, Morgan Stanley and J.P. Morgan all named semiconductor and defense companies, as well as other software-linked corporations, as good bets.
“Within core portfolios, we favor exposure to industries that seek to address elements of geopolitical risk. We make the case for investments linked to “economic security,” for example, including supplies of traditional energy, technology such as semiconductors, defense, and cybersecurity,” said Citigroup.
J.P. Morgan in its outlook said that it saw the trend having legs to continue in the medium to long-term, saying that: “Over the past six months, we’ve seen AI prove that its hype is real. 50% of the S&P 500’s market cap has mentioned AI on earnings calls, although less than 5% of U.S. firms are actively using the technology.
“To us, that means there could be a long runway for adoption ahead,” they concluded. “For now, the first round of winners are closely linked to semiconductor manufacturing and cloud computing: companies like Nvidia… [But] we think the theme has staying power and will accelerate in the years to come.”
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