Markets Update June 2024 - Strong divergences on the global equity markets

The global stock markets have recently presented a mixed picture. What is particularly striking is the pronounced discrepancy between Europe and the USA, which is very rare on this scale. European equities are currently suffering from political uncertainty, triggered by the new elections called in France, in which right-wing parties are likely to make significant gains. Added to this is the threat of tariffs on e-cars from China. Should this trigger retaliatory measures from China, this could in turn result in economic damage for many European companies that generate a significant proportion of their revenue in the Far East. On the other side of the Atlantic, the markets continue to benefit from the AI hype, which is driving the major technology stocks and constantly setting new record highs on the NASDAQ. The few "big techs" alone have increased their market capitalization by more than USD 1,300 billion this month, giving a decisive boost not only to the US stock markets but also to the global share index.

Recovery of European stock markets in sight

However, European stock markets are likely to recover in the near future. Experience shows that politically uncertain phases do not usually lead to sustained bear markets and that fundamentals ultimately prevail. Europe can boast favorable valuations and improved economic momentum. In addition, the trade dispute with China is likely to be resolved amicably, as neither side has any interest in escalation. The ECB's interest rate reduction cycle will also improve financing conditions for European companies. On the other hand, the US markets are showing a very extreme focus on the topic of "artificial intelligence", the momentum of which could, however, decrease in view of the price and valuation levels reached. These developments show how important it is to take a differentiated view of the global equity markets. Professional investors should therefore focus on a balanced strategy in order to benefit optimally from the various market movements.