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  • Anchor Insights May 2022

Anchor Insights May 2022

Anchor Insights

The vision of our Investment Committee to tactically adjust the appropriate investment strategy to the financial markets in any environment.

Anchor Insights May 2022

Market Wrap

  • April was moved by a rise in US 10 year Treasury yields to 2.9%, and an appreciation of the American currency to 1.05 EUR/USD.
  • S&P 500 sank -8.8%, consolidating the third worst start to the year in the history of the index.
  • World economy revising its growth projections downwards. Inflation shows signs of moderation.

Insights

  • Earnings projections are adjusted downward due to supply problems. Companies such as Google, Facebook and Amazon reported earnings or guidance below expectations.
  • The current economy is beginning to adjust to an "end of cycle" scenario. We believe that declines in cyclical stocks and technology may still worsen in the short term.
  • We see attractive points in corporate fixed income in US dollar, with returns of 4%. US dollar has a positive scenario, with more attractive rates.

Variable Income

We favor US stocks over European and Asian stocks.

Earnings call begin to be consistent with a slowdown in the economy. In this context we favor defensive companies in the short term:

  • Health: countercyclical sector, historically more defensive and with good fundamentals.

  • Agribusiness: rising prices of raw materials and bottlenecks due to the war in Ukraine have been favoring this sector.

  • Consumer discretionary: we are positive on services, travel & airlines, ahead of a record summer season.

Long term Opportunities:

  • Technology: it is cheap after the falls since the beginning of the year.

  • Renewables: due to rising energy prices and less dependence on Russia.

Fixed Income

Some selective opportunities, although rate uncertainty is a risk.

  • During the month of April, corporate spreads in US dollar were widened by 15bps. We see it as attractive because returns are around 4%.

  • We are underweight euro corporate bonds as credit spreads are still very tight.

  • High Yield in both euros and US dollar could be affected by a weakening of economic fundamentals. We believe that it still does not pay for risk.

  • We remain underweight inflation-linked bonds as expectations may have peaked.

Alternatives and Currencies

  • US dollar is at its lowest level since 2016 at 1.05 due to a more predictable monetary policy than the euro and the war in Ukraine. Although much is already priced-in, we may see it reaching parity levels.

  • Oil stabilized in the $100-$110 range, and gas rose 30% in April. We believe it’s risky to buy Energy at these levels, but prices may remain stable in the short term.

  • Inflation and supply problems favor the agribusiness sector. We see medium-term growth for these Soft Commodities.

01 May Anchor Insights May 2022
Posted By Anchor 0 Comment(s) 496 View(s) Anchor Insights

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