MILAN, Oct 1 (Businesshala) – BofA Global Reich has cut its outlook for European stocks, predicting a fall of about 10% by the end of the year, given a shift toward “anti-Goldilocks” in the macro background. where slow growth is accompanied by high discount rates.
In a note obtained on Friday, BofA said it saw the STOXX 600 index falling to 420 points by the end of 2021, and reduced its stance on the market from neutral (.STOXX) to negative.
On Friday, the index was around 452 points.
European stocks are up 70% in the past 18 months, a powerful economic recovery as well as a nearly 200 basis-point drop in “real” bond yields, the discount rate for equities since March 2020, BofA told clients. told.
“However, in response to more aggressive rhetoric by the central bank, real bond yields are beginning to rise again. We expect this move to continue,” the bank wrote.
“The macro backdrop for equities is shifting from Goldilocks, (ie accelerating growth and falling discount rates) to anti-Goldilocks (slowing growth and rising discount rates),” he said.
The note said that capital goods, auto and miscellaneous financials have been reduced.