ABN AMRO MeesPierson Ups Equity Position Amidst Optimistic Economic Outlook

ABN AMRO MeesPierson Ups Equity Position Amidst Optimistic Economic Outlook

(IN BRIEF) ABN AMRO MeesPierson, the private bank, announces a shift in its equity weighting from neutral to slightly overweighted, citing a more favorable macroeconomic landscape and the potential for interest rate cuts. Chief Investment Strategist Ralph Wessels highlights the diminishing concerns over recession and inflation, leading to a positive growth outlook in the US and Europe. Despite caution regarding overly optimistic profit forecasts, the bank sees opportunities in specific sectors, particularly in information technology and healthcare. Additionally, high-quality bonds remain attractive amidst market uncertainties, providing a buffer for higher-risk investments.

(PRESS RELEASE) AMSTERDAM, 20-Mar-2024 — /EuropaWire/ — ABN AMRO MeesPierson has decided to increase its position in equities from neutral to slightly overweighted. The private bank sees strong current market momentum and has noted an improvement in the macroeconomic situation over the past few months. All in all, reason enough to cautiously expand equity investments again, the bank believes.

• ABN AMRO MeesPierson increases equity weighting from neutral to slightly overweighted
• Economic outlook has grown more favourable and interest rate cuts are coming into view
• Private bank sees enough scope for further rises in the markets, despite higher share prices

“The macro outlook has grown more favourable since the start of this year,” says Ralph Wessels, Chief Investment Strategist at ABN AMRO MeesPierson. “At the beginning of 2024 we were looking at the threat of a recession and inflation, but these concerns have faded fast. Although inflation is proving persistent, it is becoming more manageable in the US and Europe. That means it’s now possible for central banks to cut interest rates in the near future. We expect to see the Fed and the ECB make the first cuts in June.”

Like the spectre of inflation, the risk of recession has also faded significantly in ABN AMRO MeesPierson’s view. The private bank points out that consumers still have a savings buffer in place and real income (income corrected for inflation) is also moving in the right direction. While the bank acknowledges that growth is not astronomical, the pace of growth is picking up. Wessels: “We recently revised our growth expectations for the US upwards again, and predict it will reach 2.1% this year – slightly above trend. In Europe, growth will probably be low in 2024, but still positive at 0.4%. Given the combination of stronger than expected growth, falling inflation and the prospect of interest rate cuts, we are somewhat more positive about equities. We already got lined up for this last month by opting for a less defensive sector positioning and are now cautiously taking another step by increasing our equity weighting slightly.”

Higher share prices do not augur a downslide

ABN AMRO MeesPierson notes that equity market sentiment has proved more vigorous than expected in the past few months. At the same time, the private bank sees quite a diverse picture in stock market performance at the regional and sector levels. US stock markets, for example, are doing better than their European counterparts. ABN AMRO MeesPierson sees a split in the US market, with big tech equities benefiting from excitement about AI (artificial intelligence), while the rest of the market is having to manage without this boost.

Wessels believes this is also impacting the valuation of equities: “We see that price-earnings ratios for equities in certain parts of the IT sector are on the high side, while valuations in the wider market have risen less quickly. In light of this, we don’t believe there’s any need for investors to fear a major downslide even though US and European indices have hit new records several times in the past few months. All in all, we think market momentum is strong enough to drive further price rises.”

Profit forecasts overly optimistic; opportunities in specific sectors

All that glitters is not gold, and while market analysts are predicting a strong recovery in corporate earnings in the next 12 months, ABN AMRO MeesPierson is less optimistic about profit forecasts. That said, the bank does believe there are promising opportunities to be found in specific sectors, partly because a lot of money is expected to be invested in AI, the energy transition and data infrastructure in the coming years. ABN AMRO MeesPierson remains positive about the information technology and healthcare sectors (both overweighted). It is underweighting the financial institutions sector, and increased its weighting in the industry and luxury goods & services sectors in February (from underweighted to neutral). At the regional level, ABN AMRO MeesPierson still favours the US (overweighted) above Europe (underweighted).

High-quality bonds remain attractive

On the bond market, ABN AMRO MeesPierson remains positive about high-quality segments such as government bonds and investment-grade corporate bonds. The bank points out that interest on US and German 10-year government bonds currently stands at 4.3% and 2.4% respectively – higher than interest rates on savings. And these bonds can act as a buffer if higher-risk investments hit heavy weather, says the private bank.

Media Contact:

Hans Sjouke Koopal
Sr Press Officer Personal & Business Banking and ABN AMRO MeesPierson
hans.sjouke.koopal@nl.abnamro.com
+31 (0)20 3009154

SOURCE: ABN AMRO Bank N.V.