(Bloomberg) — European stocks face a series of hurdles to extend their 2024 rally after hitting another record high this week. Money managers at Goldman Sachs Group Inc., BlackRock Inc.
and Northern Trust Asset Management warn investors should be prepared for mounting risks from the region’s lackluster economy and its impact on corporate earnings. The US elections are adding an extra layer of uncertainty. Markets are bracing for a volatile final quarter as a seemingly unstoppable rally in the first half has shifted into fluctuations of peaks and troughs over the past three months.
And while China’s long-awaited stimulus measures could provide new momentum, the bar is high for equities to post meaningful gains. Stocks are “sensitive at the moment,” said Helen Jewell, chief investment officer of fundamental equities for Europe, Middle East and Africa at BlackRock. “The US election is incredibly difficult to call, and you’ve got uncertainty around the macro outlook.
This fragile market is going to continue until we get visibility into 2025.” A weak economic backdrop in Europe contrasts sharply with the region’s equity benchmark at an all-time high. While fears of a global recession have eased as investors grow more confident about US growth, private-sector activity in the euro area shrank this month and forecasts indicate a looming contraction in Germany.
This week, Northern Trust cut its European allocation to neutral from overweight, citing the worrying macro.