FRANKFURT (dpa-AFX) - In a challenging market environment, Deutsche Bank sees opportunities for investors in the coming year. It should be a good year for equities and bonds thanks to interest rate cuts. "The synchronization of the two asset classes could continue for some time: We expect high single-digit returns until the end of 2024," said the chief investment strategist for private and corporate clients, Ulrich Stephan on Tuesday in Frankfurt as part of a capital market outlook.

However, investors should be aware of the numerous risks, such as wars, monetary policy and a fragile economy. After all, economic conditions are likely to remain difficult. According to the bank, global economic growth is likely to slow to 2.6 percent in the coming year - and thus to a level that roughly corresponds to the recession threshold that is usually assumed.

In the eurozone, gross domestic product is likely to increase only slightly, while the experts are assuming a contraction of 0.2 percent for Germany. The economists have lowered their forecast following the recent constitutional court ruling. "Although the fiscal policy adjustments by the German government are still pending, the economic policy uncertainty and spending cuts are likely to reduce growth by around half a percentage point in 2024," said chief economist Stefan Schneider.

The timing of the first assumed interest rate cuts, as well as the election results, are likely to be of greater relevance to the market over the course of the year. After all, 2024 will be the "biggest election year in history", the experts emphasized, partly due to the US election in November.

The experts see interest rate cuts in the US and the eurozone from the middle of the year, which has recently been frequently mentioned as an expectation on the market. In the USA, they expect a reduction of 1.75 percentage points to between 3.50 and 3.75 percent by the end of the year. In the eurozone, they expect a cut of one point to a deposit rate of three percent.

The development of the inflation rate is likely to play a decisive role in the potential for interest rate cuts. "The central banks will have to worry about inflation for some time to come," warned Schneider. He sees good reasons why price increases will not fall below the target of two percent in the long term. These include the expansionary fiscal policy, low investment, a worsening labor shortage and the energy transition, which will be expensive for the economy.

Transferring all these assumptions into equities, the year should be a good one. "We see upside potential of almost ten percent, as corporate profits are likely to pick up in 2024," said Stephan in a global context. However, the trees will probably not grow into the sky here in Germany, as his emphasis that the profit estimates for Germany implied by the market are too high shows.

Based on current levels, Deutsche Bank assumes that the DAX will rise by around four percent to 16,600 points in 2024. In a historical context, this is a relatively small increase, but it promises a near record high. From a sector perspective, Stephan sees the financial sector as a good choice due to persistently high interest rates. Banks can be invested in with more risk and insurance companies more conservatively. In general, he recommends value stocks with valuations that are significantly lower in Europe than in the USA.

Stephan also considers the US technology sector to be relatively promising. The expert expects the leading US index Nasdaq 100, which is dominated by this sector, to reach 17,000 points at the end of 2024, 6.5 percent higher than at present.

There is probably no way around the "glorious seven", he said, referring to the big tech giants Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla./tih/bek/jha/