Fund managers from around the world surveyed by Bank of America confirm Spain as the worst of the large European markets to invest in 2024. The conclusion is that “Italy and Spain are the least preferred,” according to Andreas, told this newspaper. Bruckner, European equity strategist, BofA Global Research/Bank of America.
Bruckner indicates that the question to managers about the large European markets was whether they planned to “overweight or underweight” those countries in their portfolios “in the next twelve months” and the answer was upward in Germany, the United Kingdom, France and Switzerland, while it fell in the same terms in Italy and Spain. This is the bank’s traditional monthly survey among funds from around the world with the particularity that it is the final one of the year. The result consolidates Spain in last place after the one already recorded in November. “underweight” in stock market jargon is that managers believe they should allocate less funds in their portfolios to the Spanish market than would be appropriate given its size. A hundred fund managers managing more than $300 billion participated in the regional section of this global survey.
The survey does not detail the reasons for this skepticism of managers towards Spain and Italy, but in other sections of the survey it maintains that the majority expect a worsening of the European economy due to the lasting effect of the tightening of the European Central Bank’s policy with “destruction in response to deteriorating credit conditions and fading budget momentum,” due to the return of deficit and debt rules in 2024.
Spain and Italy are among the most indebted countries in the EU and present more legal certainty risks than other large European economies, although the fact that they are the largest theoretical beneficiaries of EU funds has not so far offset this perception. Italy is, however, further ahead than Spain in its execution and processing of payments in Brussels.
This poor indicator contrasts with the economic forecasts of another study. As published this Friday by the consulting firm Focus Economics, the prospects for the Spanish economy are favorable within the deceleration. The consensus of the analysts participating in the study of this other consulting firm is that the Spanish economy will grow by 1.4% in 2024, above the European average of 0.6% and large economies such as France (0.8%) Italy ( 0.5%) and Germany (0.4%).
However, the Focus Economics report makes this point about the Spanish economy: “The pace of economic growth should slow in 2024 due to less accommodative fiscal policy, the delayed effects of tightening monetary policy and reduced savings.” In his opinion, “if a tax increase is carried out, it could discourage investment. Meanwhile, the costs of debt service, higher than expected, and the uncertainty derived from the Government’s fragile parliamentary support are factors that could affect negatively to investment.”
The outgoing first vice president, Nadia Calviño, said three weeks ago that she had held a meeting in New York with international investors “to convey a message of confidence in the Spanish economy.” The Bank of America survey was conducted in the second week of December.
More generally, the result of the survey is that there is optimism “in European equities in 2024, but the recent rally seems exaggerated.” Therefore, they do not expect continuity of the recent stock market rally. “Following the strong rally in equities since the end of October, 65% expect the European market to suffer short-term declines, compared to 47% last month. 88% of investors believe that European earnings per share will suffer declines as a result of slowing growth and weakening inflation,” says Bank of America in its survey. Regarding the global economy, managers’ expectation is that it presents a low risk of recession and the majority bet is on a “soft landing.” The US budget push will play a big role in this outcome, according to respondents.