A good investment strategy goes a long way

See how our investment strategy responds to economic and financial events.

A good investment strategy goes a long way

See how our investment strategy responds to economic and financial events.

Tech giants 'Magnificent Seven' have huge impact on stock market

The 'Magnificent Seven' did not steal their name. These seven tech giants have solid foundations and a long-term vision, making them well positioned for future growth and long-term success. Mark Van Assche, Private Banking and Wealth Office account manager, talks about it with Baptiste Mesot, fund manager at KBC Asset Management.

22-02-2024

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What’s happening in the world? And what are the implications for the financial markets? 

Update March 14, 2024

Economy

  • Economic data points in the manufacturing industry and the service sector seem to be gradually stabilising, including in Europe.
  • The US economy remains robust due to continued low unemployment and strong consumer spending. As a result, economic growth in the US continues to do surprisingly well.

Oil price - inflation

  • In both the US and Europe, the (core) inflation trend is still tilted to the downside, with occasional brief flare-ups in the interim.
  • In China, producer prices are dipping below zero and consumer price growth is fluctuating around that level, too. 
  • Oil prices remain volatile.

Fiscal and monetary policy

  • The exceptional stimulus programmes are being scaled back, but there is no sign of savings drift. Programmes such as EU Next Generation and the Inflation Reduction Act in the US are still substantial and continue to offer considerable support. China is also stimulating its flagging economy. 
  • Central banks in the US and Europe have raised key rates at an unprecedented pace in an effort to slow growth and cool inflation.
  • At their January meetings, the banks confirmed not only that things were moving in the right direction, but also that it wouldn’t be appropriate to cut key rates until there were more indications that inflation was moving persistently towards 2%.

Bond markets

  • Interest rates appear to have peaked. 
  • However, central bank members regularly blow both hot and cold in their press conferences regarding the timing of their monetary policy adjustments. As a result, we still see interest rates making occasional bucks, which immediately affects bond prices.

Equity markets

  • Sentiment is positive for the asset class.
  • While the outlook for company results in 2024 may be slightly overly positive, the market doesn’t seem to be particularly worried about it for now. 
  • The results for the fourth quarter show profits growing at almost 8% in the US, unlike profits in the euro area which contracted by more than 12%. Despite the noticeable difference, the market had already factored this into their forecasts. In terms of the profit trend, both regions have surprised in the positive sense.

Risks

  • Oil prices are particularly volatile but remain below the recent peak of September 2023.
  • This is fuelling the current prevailing expectation of lower inflation. However, the conflict in the Middle East may continue to cause nervousness. 
  • Not an easy environment, therefore, for policymakers to take decisions on interest rates.
  • The US elections could also give rise to volatility later this year.

Continuing better-then-expected economic data propelled US stock markets to a new all-time high. Geopolitical uncertainty remains. Government bonds lost ground as investors scaled back the prospect of rates being cut in the first quarter following  the most recent central bank announcements.

Siegfried top, Senior Investment Strategist KBC Asset Management

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