Anchor Insights Septiembre 2022

• Fixed Income and Equities, both dropped in August .
  
• The Fed's tough message against inflation placed EUR/USD at lows below parity and increased the required return on fixed income.
• The earnings season ended with 77% of the companies beating expectations and an average growth of 8.5%.

• There is value in corporate bonds in dollars and it is looming in European high yield as well. For now, better to stick with high credit quality bonds.
  
• The European stock market is trading at recession multiples, while the US could still correct an additional 6% if a sharp economic slowdown is confirmed.
• Although we are entering the month with the worst historical performance of the year, excessive investor pessimism could support the stock markets and prepare for a rally in the fourth quarter.

Maintain slight overexposure to the US and Europe.

The most defensive sectors can benefit from a late macro cycle, even recession:

• Healthcare: it will offer us more protection than cyclical sectors. We can find quality companies.
• Agribusiness: as long as the war in Ukraine persists.
• Consumer Staples: able to pass cost increases on to consumer.

Long term opportunities:

• Technology: above-average growth in a low valuation environment.
• Renewables: investment surge for energy transition in Europe and the US.

We favor Corporate USD for better return/risk ratio.

• The rise in US bond rates after Jackson Hole has pushed corporate fixed income yields above 5%.
• On the other hand, the possible yield rises of the European benchmark bond still advises against overweighting the European corporate.
• High Yield, both in euros and in dollars, is beginning to show attractive returns, although it is still too soon to be exposed.
• We continue to underweight inflation-linked bonds, as inflation expectations are lower than the current rate.

• The parity makes the EUR/USD a floor, helped by the greater aggressiveness in European monetary policy.
• The weakness of demand in the event of a global recession predicts lower energy prices.
• Inflation and supply problems favor the agri-food sector. We foresee medium-term growth for these Soft Commodities.