S&P 500 set for 8% rise as Banca March backs shares
Banca March sees the S&P 500 gaining another 8% over the next 12 months, despite the risk from the conflict in the Strait of Hormuz. Joan Bonet, the bank’s director of Strategy and Advice, presented the forecast in Madrid on 24 September. He said growing company profits should outweigh the geopolitical threat.
The bank also believes markets are expecting far too many interest-rate rises. Rate futures are pricing in up to four increases in the United States and three in Europe, Bonet said. Banca March expects just one further precautionary rise from the US Federal Reserve and one from the European Central Bank over the next 12 months.
Profits are running ahead of share prices
The S&P 500 has already risen by almost 13% this year, excluding dividends. But its valuation has fallen because company earnings have grown faster than share prices, Bonet said.
The US index trades at about 20 times earnings, down from a recent high of 22 times, though above its historical average of 17. Banca March says valuations have become 10% cheaper since the start of the year.
The bank expects emerging markets, tracked by the MSCI Emerging Markets index, to rise 12% over 12 months. It forecasts a 6% gain for Europe and favours Germany within the region because of its fiscal boost.
Oil pressure remains a threat
Bonet pointed to the drone attack on the Saudi oil pipeline linking the Strait of Hormuz and the Red Sea as a drag on the outlook. Without that geopolitical risk, he said, the current investment cycle would give a stronger lift to economic output and corporate earnings.
Banca March expects the conflict with Iran to keep pushing oil prices higher in the short term. It expects Brent’s “war premium” to fade gradually, with crude at $90 to $95 a barrel until the end of 2026 and averaging $85 in 2027. The bank forecasts average eurozone inflation of 2.6% next year.
Investment tied to artificial intelligence is expected to top $1 trillion worldwide this year, according to Banca March. The bank says technology and data-centre spending accounts for more than half of current US economic growth, supporting its forecast of US growth close to 2.5% in 2027 and global growth of 3.3%.
Source: Europa Press / Mallorca.com