Expert insights from BlackRock Fundamental Equities – Q2 Stock Market Outlook

Stock Market Monitor

  • Helen Jewell

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Key points


A broader market leadership?

We believe equity market momentum can continue into the second quarter of the year – although returns may be more muted and across a broader section of the market.


Opportunities in Europe and Japan

Markets in Europe and Japan have hit record highs. We believe rewards are still on offer for active stock pickers.


An exciting time for smaller companies

Potential interest rate cuts could act as a catalyst for smaller companies to bounce back from depressed valuations, in our view.

Equity market momentum to continue?

At BlackRock Fundamental Equities, we expect the environment to remain supportive for stocks in coming months, but the leaders may come from a broader section of the market. Inflation across developed markets has been on a downward trend, and this should give central banks the ability to cut interest rates. This would be positive for equities, in our view. However, we don’t see a return to the “cheap money” era that followed the Global Financial Crisis (GFC), and we believe this will lead to a greater gap between the stock market winners and losers in a more alpha-centric investment regime.

Technology-related stocks globally have led the way in 2024 – and for good reason. Some of these companies have delivered extremely strong earnings, powered by the mega force of digital disruption and artificial intelligence (AI). Yet valuations for these companies are lofty. We believe potential rate cuts could lead momentum to broaden out to areas of the market that are cheaper, and also home to quality companies with attractive long-term earnings growth potential.

A broader set of opportunities

MSCI World Small Cap vs. MSCI World, 1998-2024

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Index performance returns do not reflect any management fees, transaction costs or expenses. An index is unmanaged and one cannot invest directly in an index. Source: BlackRock and MSCI, 31 Jan., 2024. Returns rebased to 100.

Three reasons to consider Europe…

We believe Improving macroeconomic conditions, potential rate cuts and surging company buybacks (see chart) should support the region.

… and three reasons to explore Japan

Return on equity is increasing, several institutions are pulling in the same direction, and reshoring should benefit Japanese companies, in our view.

Marshalling the mega forces

Powerful secular growth trends such as the low-carbon transition and ageing societies could separate the winners from losers across regional markets.

Is now the time for smaller companies?

Small caps have a history of outperformance (see chart). We believe lower rates and economic recovery could persuade investors to revisit this area.

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Risk warnings

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

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