Wealth Outlook 2024 - Slow then grow

116 Wealth Outlook 2024 | Regional outlook Europe: a slow recovery, with stronger equity returns later into 2024 Considerations: • We’re neutral Europe ex-UK, UK and Swiss equities for now, but do see some potential opportunities for qualified clients in European real estate investment trusts (REITs), given the heavily discounted valuations of their underlying property portfolios. • Euro- and sterling-based local investors may benefit from high-quality government bonds given the historically high level of yields. • Some improvement in business cycle dynamics by late spring/early summer, supported by a China recovery, may see us starting to add European equity exposure more broadly, starting with ex-UK. As a highly import- and export-oriented economy, Europe remains strongly dependent on global growth. Economic sentiment will thus spend a good part of 2024 in wait-and-see mode, but should improve modestly, especially within the manufacturing sector, where output has contracted for most of 2023 and inventories already are back down to less worrisome levels. Investment attitudes should also recover as the banking system begins to ease lending standards and an expected fall in government bond yields from historical highs reduces the cost of borrowing. We forecast that European Union (EU) gross domestic product (GDP) growth will largely slow in 2024, growing by 0.4% (compared to 0.5% 2023) before some acceleration to 1.3% in 2025. For the UK, we anticipate the real GDP growth rate will largely tread water in 2024, growing by 0.6%, but outpacing the EU slightly with a gain of 1.5% in 2025 ( FIGURE 1 ). FIGURE 1 Euro area & UK GDP growth (actual and forecast) -6 2005 2010 2015 2020 2025 4-quarter change (%) 6 Euro Area 20 UK Forecast 0 Sources: Eurostat, Office for National Statistics, Bloomberg and Citi Global Wealth Investments, as of November 16, 2023. All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events. Past performance is no guarantee of future results. Real results may vary.