Fund managers have struck a cautious tone on the prospects of the European economy — and stock market — going into 2024, but see some opportunities for investors. A recent survey by Bank of America showed that 68% of professional investors questioned see upside for European equities in 2024, however 65% see near-term downside. BofA surveyed 254 participants with a total of $691 billion in assets under management. The vast majority of the fund managers (88%) also broadly expect a fall in European earnings per share “in response to slowing growth and fading inflation,” the investment bank’s strategists led by Andreas Bruckner wrote in a Dec. 19 note. Almost half of the fund managers (44%) “regard earnings downgrades as the most likely cause of a market correction, followed by increased financial stress, at 24%,” the strategists added. It comes after a bumpy year for European stocks which saw the Stoxx 600 index rise 12.65% as of Dec. 28. In answer to the question: “Do you think that the European equity market is currently overvalued, fairly valued or undervalued?,” a net 6% of participants said they consider European equities overvalued — up from a net 26% saying they were undervalued in November. In line with a slowdown in equity markets, the majority of participants (88%) expect a slowdown in Europe over the coming months, following a tightening of monetary policy. Economic growth in the euro zone contracted by 0.1% in the third quarter , according to flash estimates, below consensus estimates. Meanwhile, annual inflation in the euro zone fell to 2.4% in November from 2.9% in October. It marks a steep decline from the 10.7% recorded in October 2022 . Recent projections released by the European Central Bank see the economy expanding 0.6% in 2023, down from a prior forecast of 0.7%. They estimate GDP will expand by 0.8% in 2024, from 1%, previously. Overweight insurance and tech Against this pretty bleak backdrop, “59% of investors see downside for European cyclicals relative to defensives over the coming months, up from 44% last month,” BofA’s strategists wrote. “A plurality of 44% expect value to underperform growth, as slowing growth and fading inflation leads to more dovish central bank policies.” Even so, the fund managers surveyed were bullish on European insurance and tech. Calling them “the biggest consensus sector overweights,” the participants see opportunities in both sectors going into 2024. They are also looking favorably at healthcare, according to BofA. Conversely, the chemicals, autos and construction sectors are the “least popular” among investors going into next year. On a geographical basis, the fund managers identified Germany as the “favorite equity market in Europe,” and Italy as the least favorite. — CNBC’s Michael Bloom and Jenni Reid contributed to this report.