Anchor Insights November 2023

• The decline in the stock market continued, in all countries and sectors due to the readjustment to changing bond yields.
• Stabilization in fixed income after US bonds reach new interest rate highs.
• Gold rebounds amid increased uncertainty due to the war in the Middle East. Oil retreats.
• The dollar stabilizes due to the increase in the deficit and increasing Treasury financing needs.

• Published corporate earnings are higher than expected. Doubts about whether share buybacks will facilitate a year-end rally or weigh more on recession fears from high rates.
• The yield curve is flattening due to rising long-term interest rates. It's not time yet for duration.
• The USD could suffer from the Treasury's financing needs and the spending ceiling.
• Oil price cut likely due to increased production.
  

Long-Term Opportunities:

• Technology: Growth higher than the rest of the sectors and cash generation in companies that have competitive advantages.
  
• Cyclical consumption: It usually bottoms out before the start of recovery.
  
• Renewables: The need to decarbonise drives huge plans to invest in renewable energies.

• Credit spreads at medium levels, on both European and US bonds. 
• Stabilization of yields on government bonds, both European and American.
• We expect a repricing in high yield in both euros and dollars in the face of an increase in default rates. Preference for BB.
  

• The euro and the dollar are in the range of 1.08-1.045. Greater tendency to weakness in the USD by phase of the monetary cycle.
• Correction risks in real estate assets and private equity due to rising interest rates and falling multiples.
• Short-term resistance in the price of oil barrel, pending adjustments by OPEC and reduced demand.

• Economic slowdown, recession due to tightening of monetary policy.
• Extension of the Israeli-Palestinian war to the Middle East, oil at 200 USD.
• Conflict in Ukraine, escalation of NATO-Russia tension, continued sanctions.
• The persistence of high inflation leads to social tensions and populism.
• Financial fragmentation of the Euro public debt market.
• Reduced liquidity in financial markets, volatility.
• Increase in cybercrime, disruptions to essential infrastructures.
• Instability of the banking sector, reduction of access to financing.

• Inflation is normalizing, although it is likely to remain at levels higher than those of the previous cycle. More restrictive monetary policies could be paused to allow time for a slowdown or mild recession scenario.
• Corporate profits have already fallen and growth is once again estimated to be in line with the long-term trend, except for the energy sector.
• Risks for emerging countries in a context of higher interest rates and desynchronization of growth and inflation between economic blocs.
• The main medium-term risks come from the US-China bipolarization, the evolution of the Russia-Ukraine war, and the spread of the Israeli-Palestinian war to the entire Middle East. Although a mild recession has been priced in, the risk of a correction in equities persists for geopolitical reasons.