(News Bulletin 247) – In a note published this Friday, the American bank’s strategists explain their overweighting of the Swiss market, which has underperformed other European indices and has defensive virtues. On the other hand, the establishment adopts a neutral position on the Parisian market.

Which European market should we favor in 2025? Bank of America has made its choice. In a note published this Friday, its strategists indicated that they were overweighting Swiss equities with a view to next year.

In 2024, the SMI, the reference index for the Zurich market, will only rise 5% when the Stoxx Europe 600, a pan-European index, will rise 9.7%.

“Switzerland has underperformed the European market by 15% over the past two years, weighed down by a robust global growth environment, which has pushed global risk premiums to ultra-compressed levels” and pulled down defensive sectors such as food, beverages and pharmaceuticals, which are very present in the Swiss market, explains Bank of America.

The Swiss Stock Exchange, in particular, was hardly helped by the notable poor performance of Nestlé, its second largest capitalization, which has lost 23.13% since the start of the year, weighed down by disappointing growth. The agri-food specialist had also issued a profit warning in July.

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Cautious on France

However, Bank of America judges that the defensive virtues of the Zurich Stock Exchange should be more favorable to it in 2025, a year in which the American bank anticipates a moderate slowdown in global growth.

This leads it to favor food consumption (“food and beverages”) and pharmacy for 2025, two sectors which are therefore over-represented in Zurich.

The establishment believes that the “food and beverages” compartment will record a stock market performance of 5% to 15% in 2025 in Europe, when pharmaceuticals will grow from 6% to 12%.

By integrating its macroeconomic and sectoral projections at the Swiss market level, Bank of America estimates that the Swiss stock market has a potential increase of 8% by mid-2025.

Regarding France, Bank of America adopts a neutral (“market weighting”) approach.

The CAC 40 is underperforming almost everything it is possible to underperform this year, weighed down by political instability in France and the impact of China’s slowdown on the activity of luxury groups. , the large compartment of the Parisian market.

“France is a procyclical index, which generally moves in line with the European equity market, but has been well below since June, when President Macron unexpectedly called for early legislative elections,” recalls Bank of America.

“Our macroeconomic and sectoral projections imply a positive trajectory for the French stock market, but we maintain a ‘market weighting’ due to the risk of persistent political volatility,” continues the establishment. Its projections give French equities a potential of between an increase of 4% and a decrease of 2% over the next twelve months.

Pessimism about Germany

Bank of America is also “market weighted” and therefore neutral on the British market, which has been penalized this year by the underperformance of the hydrocarbons sector and the appreciation of the pound sterling.

The establishment has a negative opinion on German, Spanish and Italian stocks since the bank is underweight them. She sees the Spanish market at best gaining 1% and at worst falling by 6% in 2025, while the German stock market would lose between 1% and 8% and the Italian market between 1% and 10%.

For Frankfurt, Bank of America believes that German stocks, which are on the rise this year (the Dax has continued to set records this year), are incorporating too much good news. This at a time when global growth is slowing. Bank of America is also cautious on the sectors which have allowed Germany to outperform other countries on the stock market (software, telecoms, insurance and “capital goods”, capital-intensive goods).

Both Italy and Spain benefited from their significant exposure to the banking sector which performed very well on the stock market this year (except in France). But in 2025, banks risk underperforming other sectors due to the economic slowdown, Bank of America anticipates.