Slightly high valuations in the US and moderate in Europe. Better visibility of an economic slowdown and profit contraction already implicit in prices. Higher multiple depending on the evolution of monetary policy and expected earnings growth for 2024 somewhat above the long-term trend.
Overweight sectors that can stand a recession or stagflation environment:
- Health: stable income and margins supported by public spending.
- Agri-food: the climate crisis and the war in Ukraine put pressure on food prices.
- Staples: with the capacity to transfer price increases to the consumer.
- Financials: you benefit from an environment of rising interest rates.
Long term opportunities:
- Technology: Although there may still be volatility, attractive multiples and higher growth than other sectors.
- Cyclical consumption: It usually bottoms out before the start of recovery.
- Renewables: the need to decarbonize drives huge investment plans in renewable energies.