Is the WSE discounting the past instead of the future?

There is an old stock market adage that says: the stock market discounts the future, and meanwhile on the Warsaw Stock Exchange we are observing declines, as if a great crisis were to come, and the WIG 20 expressed in the US dollar is already in bear market territory, falling by over 20% from the peak.

In fact, the Polish economy is not in the best condition, as indicated by PMI indexes or even GDP data, but these are past data, not future data. The stock market seems to be adjusting to them as if there was too much optimism before. Nevertheless, the prospects for the Polish economy at the moment are not bad.

Retail sales are rebounding, companies are getting rid of inventories and seeing prospects for improving production, interest rates and fuel prices are falling. Regardless of the reasons behind it, these are generally not bad economic reasons. In theory, falling interest rates may raise target levels for stock valuations and the popular price-to-earnings ratio. Additionally, share prices of dividend-paying companies may also be higher as dividend rates may compete with decreasing interest rates on deposits and deposits. Prospects for consumption i CBA for the fourth quarter and the next two quarters of 2024 also seem good.

According to the macroeconomic survey NBP at the end of the third quarter of 2024, the GDP growth rate is expected to be 2,7%, and the NBP reference rate may be below 5% with inflation around 6%.

If consumption, sales and the entire GDP are to grow in real terms with relatively high inflation, this may be even more positive for the results of WSE companies, where nominal values ​​should be high.

Perhaps this is too optimistic a view, but the Warsaw Stock Exchange currently seems to live more in the past than in the future.