Aegon AM: Listed Equity Outlook

Aegon AM: Listed Equity Outlook

November 27, 2024

Outlook Equity
Outlook vooruitzicht (04)

After the strong performance of equities during 2023, driven particularly by tech companies involved in artificial intelligence (AI), the equity markets have continued to perform well into the first half of 2024.

In 2023, many investors were concerned about the impact of tight monetary policy and rising labor costs on margins. However, corporate profits have been strong and rising. Companies across various sectors managed to maintain or even improve their margins and earnings, with IT, Consumer Discretionary, and Communications standing out.

Despite the persistence of the 'higher for longer' narrative by the Fed well into 2024, recent developments have seen a shift in the Fed’s narrative and interest rate cuts are being priced in. The probability on a soft landing has increased but is far from a certainty.

In 2023, equity markets were driven by technology companies, but many other sectors also performed reasonably well. In the first half of 2024 the market has been even more extreme. The technology and communications sectors have excelled, while several other sectors have declined.

Additionally, the gap between growth stocks and value stocks has widened throughout 2024, with overall market performance becoming increasingly concentrated among growth companies. The emergence of powerful AI models has caused a seismic repricing of companies involved in AI applications and their infrastructure.

On a regional level, the US market has vastly outperformed other markets due to its large share of technology companies. Emerging markets have underperformed developed markets in 2024 so far, with economic issues in China contributing to its underperformance.

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