Wealth Outlook 2024 - Slow then grow

117 Wealth Outlook 2024 | Regional outlook Europe: a slow recovery, with stronger equity returns later into 2024 3 headline risks to keep an eye on Spread between the 10-year Italian multi-year treasury bond (Buono del Tesoro Poliennale, or BTP) and German Bunds In October, the spread between the 10-year Italian BTP and German Bund crossed the symbolically important 200 basis points threshold. Is this a sign of worries about the risk of Italy becoming a weak link in a worse- than-expected recession? Could be, but also important to keep in mind that the ECB has ample tools at its disposal to avoid panic- driven spread widening. UK elections Prime Minister Rishi Sunak’s Conservative Party is trailing very far behind Labour in the polls. Most observers agree that he’s going to push out the next general election as far as he’s allowed, likely until autumn 2024. That gives investors plenty of time to scrutinize Labour statements about key fiscal pledges and for any hints of a possible closer relationship with the EU when the Trade and Cooperation Agreement comes up for renewal in 2026. Geopolitics Ukraine remains an agonizing human and political tragedy. Unlike last winter, when fears of a crippling gas shortage caused massive price increases and volatility, Europe looks far better prepared for this coming winter energy-wise. All bets are off of course – to the upside – in the unlikely event of a sooner-than-expected end to the war. European assets would expect to see significant inflows as investors focus on the subsequent peace dividend and major reconstruction effort. Unless the war between Hamas and Israel escalates further, it would appear to have little impact on European asset prices. That said, the fact that there are now two major conflicts increases the risk of an oil shock. In addition, the Middle East conflict risks strains in NATO relationships as well as unity around ongoing support for Ukraine. The prospect of a second presidential term for Donald Trump is likely causing concerns in some European Chancelleries with respect to the US role in NATO, trades and tariffs and the EU’s green agenda, among other issues.