Outlook on European Stock Markets for Next Year | Wassim Jomaa in an Interview with Bloomberg Asharq

In Europe, the Purchasing Managers’ Index (PMI) values for both services and manufacturing were below 50. European stock markets could be viewed with optimism if both indices remain stable at their current level and then start increasing as we reach 2024.

Four factors will affect profit margins:

- Wages that, by not continuing to significantly increase, will not put pressure on corporate earnings.

- Costs that relieve pressure on profit margins by not increasing.

- Possibility of sales growth.

- Rising interest rates that could erode a part of profit margins.

Markets are currently pricing in the possibility of an interest rate cut by the Federal Reserve (the “Fed”) in 2024. However, what’s more important is to price in the possibility of not raising rates, which reduces volatility and stimulates growth.

The recent rise in markets was not due to the outlook of companies on earnings growth, but to increased valuations amid the significant decrease in bond yields globally.

If markets don’t witness a sharp recession, it will be hard for the Fed to directly cut interest rates.

Watch the full interview above.