In December, the stock markets deviated from their historically bullish trend, mainly reacting to a stance that was more hawkish than expected from Fed Chair Powell. The market was generally down over the period on both sides of the Atlantic, with the exception of a few large-cap growth stocks, as investors focused on consolidating their gains ahead of the new year.
In Europe, fundamentals remained broadly unchanged. Economic indicators continued to point to a slow recovery in the European economy. Meanwhile, the region seems to be entering a more difficult consumption cycle. Momentum remained fragile as investors maintained their wait-and-see attitude, driven by the changes expected in US trade policy. China is not showing any signs of a substantial improvement in its economy at this stage, delaying the impacts expected on European equities.
The strategic allocation remained largely identical over the period, with the notable exception of the tech sector, which was revised down due to valuations deemed excessively high. The marked outperformance of tech stocks in 2024 seems difficult to sustain, exposing them more to the risk of a short-term correction. In a context of persistent uncertainty related to the political agenda of the new US administration’s policy, exposure to the communications services and healthcare sectors, which are characterised by the resilience of their returns, were maintained.
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