Anchor Insights June 2023
Anchor Insights
The vision of our Investment Committee to tactically adjust the appropriate investment strategy to the financial markets in any environment.
Anchor Insights June 2023
Market Wrap
- Generalized rise in the stock markets, around 5% in developed markets. Volatility at minimums.
- Cyclical sectors pull in June, between 6% and 10%.
- The euro appreciates by 2% against the USD.
- Fixed income consolidates and assumes there will be no rate cuts the remaining of 2023. High yield goes up.
- Gold is down 2%, oil is up 3% and stabilizes at pre-war prices in Ukraine.
Insights
- Inflation could fall faster than expected, except for the UK.
- Q2 results in sight: profit drop of -6%.
- The growth of the Chinese economy stagnates, in Q2 after a good start to the year.
Equity
Earnings beat forecasts, following analysts' downward adjustments. The most cyclical sectors have already bottomed out, preparing the start of a new cycle. We favour companies that have the capacity to transfer price increases without prejudice to sales and high cash conversion of their results. Prioritize sectors that endure an environment of recession or stagflation.
Long-term opportunities:
- Technology: Growth superior to other sectors and cash generation in companies that have competitive advantages.
- Cyclical consumption: It usually makes floor before the beginning of the recovery.
- Renewables: the need to decarbonise drives huge investment plans in renewable energies.
Fixed Income
We see attractive points in corporate fixed income in dollars, with hedged currency, and in euros.
Selective opportunities in the higher quality tranche of High Yield, although there is a risk of defaults among the worst quality issuers. In addition, the liquidity of these markets may suffer and negatively impact prices until summer.
- Credit spreads at medium levels, both in European and American bonds.
- Stabilization of IRR in government bonds, both European and American.
- High Yield in both euros and dollars can be harmed by rising default rates. The BB rated are interesting.
- Selectively, emerging economies with low external debt.
Alternatives and Currencies
- The euro and the dollar are in the range 1.10-1.05. Greater tendency to weakness in the USD by monetary cycle phase.
- Real estate bubble risks in some countries (Nordics, Canada, USA, Germany, UK), especially in commercial real estate.
- Recession risks put downward pressure on metals and energy. Volatility in commodities.
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