BlackRock’s research head, Jean Boivin, suggests that any year-end stock market rally may be short-lived due to equities not fully reflecting the outlook of higher interest rates for an extended period.
Boivin expects more downward adjustments in the stock market but anticipates a better environment in 2024 once the adjustment is complete. His team has been underweight on developed-market equities since July 2022, citing expectations of slower global growth and the fact that equities don’t yet account for the higher rate environment.
However, the recent market action in early November, with the S&P 500’s strong performance and declining bond yields, contrasts with Boivin’s outlook. While most gains in the S&P 500 are in tech giants, an equal-weighted index is flat for the year. Bank of America’s Savita Subramanian, on the other hand, suggests that an indicator at the bank implies a 15.5% price return for the S&P 500 over the next 12 months, despite low long-term growth expectations for the index when excluding tech giants.