The aggressive tightening of monetary policy by the Central Banks to tame inflation, the energy crisis and the negative macroeconomic data for the Eurozone economy, lead to a sell-off in the international markets, including the Greek one.
Investors have been fleeing stocks in the wake of the decision of Central Banks to raise interest rates at a rapid pace, rekindling fears about the outlook for the global economy. Economists and analysts warn that USA and Europe they will face recession, while predicting that inflation will remain at high levels.
Under these conditions, one after the other, the international stock market indices are a breath away from officially entering an environment bear market. It is characteristic that the Stoxx 600 is now heading into a bear market, recording total losses of more than 20% since the highs of January.
At the same time, the “race” of the dollar continues, which climbs to historic highs, sweeping its competing currencies. Euro and British pound (sterling) hit new multi-decade lows
The public European currency fell to its weakest levels since 2002, while the GBP fell to its lowest level in 37 years.
Meanwhile, leading investment houses are predicting further declines in markets and are recommending that investors stay away from stocks. H Goldman Sachs estimates that the American S&P 500 index will decline significantly and for this reason proceeds with a strong downgrading of the target by 700 points. The new target price for the quarter and six months, according to the American investment bank, is now set at 3,600 units from 4,300 units previously.
“We maintain our 2023 S&P 500 EPS estimate of $234, which represents modest 3% growth over 2022, below market estimates for EPS of $241, and in the coming months we expect negative revisions of market valuations”, explains the bank. As the American house reports, the majority of investors have discounted that the scenario of a hard landing of the economy is inevitable and are now simply focusing on the timing, size and duration of the recession. In this scenario, the S&P 500 price targets are set even lower, at 3,400 points in the next quarter, 3,150 in the six months and 3,750 in the next twelve months.
Avoid exposure to European stocks recommends HSBC to investors, pointing out that due to the energy crisis the risk reward is still not there.
Willem Sels, global CIO of HSBC Private Banking and Wealth Management notes: “I really don’t think that clients and investors should be looking at geographical allocation — I think they should be looking at the financial outlook and the earnings outlook , so I warn them to be careful when buying in Europe because of the cheaper valuations and interest rate changes.”
But Citi also claims that the shares they will not get presents from Santa Claus at the end of the year and recommends reduction of positions in the markets.
At the same time, strategists participating in Bloomberg’s regular survey consider the possibility of a year-end rally in Europe to be almost nil and proceed to downgrade their estimates for the Stoxx 600. On average, the 16 strategists surveyed by the agency estimate that Stoxx 600 will close in 2022 at the level of 418 points, i.e. it will show an increase in the next period close to 5%, based on its current valuation of 390 points.