Anchor Insights May 2022

• 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.

• 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.

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.

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.

• 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.