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.