2024 European stock market: Key sectors driving growth

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As 2023 draws to a close, European stocks have much to cheer about, with the pan-European index seeing a 20% surge and surpassing many expectations at the onset of the year.

However, this upward trajectory is not evenly spread across sectors meaning a varied economic landscape offers a wide spectrum of investment possibilities for the upcoming year.

Recap of 2023: Sector highlights and disappointments

The top-performing European sector in 2023 has been the information technology, with a robust 19% gain. A closer look within the sector reveals the Dutch BE Semiconductor Industries N.V., also known as Besi, soaring by 152% year-to-date. Besi specialises in semiconductor assembly equipment and its strong growth underscores its innovation prowess. Another strong player was ASM International NV, with a notable 103% increase. The company is known for its expertise in semiconductor fabrication equipment.

Consumer Discretionary is the second-best sector performer, with an 18% gain. Leading the pack is Pandora A/S from Denmark, famous for its customisable charm bracelets, which has seen a remarkable 96% growth.

Industrials have also held their ground, with a 17% increase largely driven by the exceptional 225% surge of Britain’s Rolls Royce Holdings plc.

Despite these success stories, not all sectors fared well. The healthcare sector underperformed with an average return of 5.9%. However, its heavyweight giant, Novo Nordisk A/S, rose more than 50%.

Meanwhile, the Utilities and Energy sectors lagged behind, with gains of just 7% and 9%, respectively.

Looking Forward to 2024: Which European Sectors Are Poised to Outperform?

Looking ahead to 2024, the picture is cautiously optimistic, with analysts predicting a median revenue growth of 6.2% and an anticipated profit increase of 4.3% among the 1,019 stocks of the MSCI Europe index.

The European Real Estate sector is expected to shine, capitalising on the anticipated reduction in interest rates, with a projected median revenue growth of 10.6% and earnings set to rise by 5.7%. Shaftesbury Capital PLC, a real estate investment trust, is set to lead the pack with a predicted 122% surge in revenue.

Financial companies, expected to grow by 7.7% in revenue and an impressive 15.4% in earnings, might benefit from a more stable economic environment as inflation and borrowing costs decrease. Admirals Group plc could lead the financial sector with a robust 160% growth in forecasted revenue, showcasing the strength of digital finance.

The Health Care sector is forecasted to see a median revenue growth of 7.8% and earnings growth of 2.2%. The standout stock within this sector is expected to be Zealand Pharma A/S, with a remarkable 275% growth in forecasted revenue, possibly due to breakthroughs in its biopharmaceutical products.

The information technology sector remains a beacon of growth with a median revenue increase of 7.7% and earnings growth of 4.1%. Meyer Burger Technology AG is expected to see a phenomenal 97% revenue growth, riding the wave of innovation in solar and semiconductor technologies.

Industrials show robust health with a 6.8% median revenue growth and a 10.9% earnings increase. ITM Power plc, specialising in hydrogen energy solutions, is predicted to experience a 272% revenue boom, reflecting the growing shift towards green energy.

For the consumer discretionary sector, a revenue increase of 6.2% and a profit rise of 6.4% are anticipated. Leading the pack is the British luxury automotive dealer Inchcape plc, with an expected 42% growth in sales.

Other sectors such as Utilities, Energy, Consumer Staples and Materials are expected to show a lower-than-average growth in both revenue and expected profits.