The BET index of the Bucharest stock exchange increased by 32.3% in 2023 and, under these conditions, investors look to 2024 and “know that they must prepare for a year full of unknowns, paved with numerous risks,” an XTB Romania analysis shows.

“2023 was a good year for US stock markets – the S&P500 rose 24.2%, even as interest rates were rising (10-year US Treasuries reached 5% in October for the first time in 16 years ), and inflation, although decreasing, still remained well above the average of previous years. Added to these factors are the international conflicts, which have intensified,” said Claudiu Cazacu, strategy consultant at XTB Romania.

According to him, even Europe had a favorable year in terms of the evolution of stock markets: although it was affected by the high price of energy, the conflict in Ukraine and the increase in public debt, it offered a 12.1% advance of the DAX stock index.

In parallel, in Romania, the BET index of the Bucharest stock exchange increased by 32.3% in 2023. In these conditions, investors look to 2024 and know that they must prepare for a year full of unknowns, paved with numerous risks.

“A good part of the optimism shown on the stock markets is related to the hope of a quick and consistent reduction in the cost of credit. Investors anticipate a decrease in interest rates in the US in March, followed by at least 5 more stages, which will bring the interest rate to 3, 75-4% in December, from 5.25-5.5%, where it is now.This is where one of the most important risks comes from: fewer interest rate cuts, if inflation proves difficult, would change the relaxed way in which some companies are evaluated – especially the most indebted ones and those in the growth segment, which includes important names in technology,” added Claudiu Cazacu.

According to him, with a difficult labor market, any shock produced in the segment of raw materials or supply chains could mean an impetus to increase inflation even more.

“Macro-level forecasts call for a mild US recession or weak growth in the first part of the year. Few, however, see a more severe recession. However, there are some signals that suggest this scenario is more likely than investors expect , such as the decrease in the quality of credit portfolios, the increase in the non-payment rate in the automotive segment or the weak prospects offered by the carrier FedEx,” the analysis shows.

Moreover, it should be taken into account that only half of the companies in the S&P500 exceeded expectations for revenue, although more than 9 out of 10 surprised in terms of profit.