Investing.com - European markets are in the green on Tuesday -Ibex 35, CAC 40, DAX... - in a busy week of macroeconomic data and one day ahead of the US Federal Reserve (Fed) interest rate decision.
At this volatile time, the experts advance their short-term forecasts. This is what César González, financial director of Avanza Previsión, an insurance company belonging to the Mutualidad Group, says about the end of 2023 and the forecasts for 2024 for the financial markets.
"The continuous rises in interest rates during 2023 have caused a high level of instability in the markets" and he warns that "worse times are to come", warns this expert.
Gónzalez explains that the main reasons for this worsening are, on the one hand, "inflation that does not end up falling to the desired level, with Underlying CPI above the general rate, which leads to high interest rates for longer and their contagion effect throughout the economy".As a consequence, the expert assures that "we will see a correction in the balance sheets of companies, a moderate recession and an agitated geopolitical situation, not only because of the war in Russia and Ukraine, but also because of the recent conflict in the Middle East", he adds.
Interest rate outlook
As for interest rates, Gónzalez believes "that rates will start to show a gentle decline in the second half of next year, 2024". The expert warns that if "interest rates remain elevated for longer, there is a greater risk of obvious instability for the markets", which would be one of the main risks for next year.
Fixed income outlook
On fixed income, he adds that "it is a great time to invest in fixed income, as these yield levels are a great opportunity to build a long-term portfolio". However, he warns that "we have to be very careful with issuers that may have problems refinancing their debts, as the levels are going to be much more demanding than they were previously at low rates".
Equity outlook
From an equity perspective, the expert points out that "the possibility of more pessimistic scenarios is increasing, given the increased uncertainty in the markets due to the possible recession in Europe, as well as whether the strength of the US economy will be able to hold up".
Translated from Spanish using DeepL.