Anchor Insights May 2024

• Correction in all developed markets and increase in emerging markets.
• Decline in fixed income prices due as markets demand higher yields.
• Strong increase in copper, gas and gold, which peaks.
• The dollar continues to strengthen against the euro, although it remains range-bound.

• The released results are well above consensus, but companies' caution for the rest of the year may lower the PE multiple.
• Although a rate hike in the US is ruled out, inflation delays expectations of rate cuts.
• Currency wars are back, with rumors of intervention on the JPY by the Bank of Japan.
• Fixed income returns to higher levels of yields due to the delay in the change in the monetary cycle, opportunity.

Opportunities:

• Information Technology: Take advantage of significant corrections to accumulate (“buy the dip”).
• Renewable Energies: the need to decarbonise drives huge plans to invest in renewable energies.
• Real Estate: stabilisation of interest rates and a readjustment of valuations.
• Healthcare and Biotechnology: increasing M&A activity in both sectors.

• Tight credit spreads on both European and US bonds. 
• Stabilization of yields on government bonds, both European and American.
• Improvement in the fixed income of emerging countries in "hard" currencies.

• The euro and dollar are in the range of 1.11-1.05. Even if the EUR lowers interest rates first, the USD tends to weaken due to the evolution of the public deficit and debt.
• Correction risks in real estate assets and private equity due to rising interest rates and lower multiples. 
• Increase in the price of oil due to increased demand from China and India. Gold rises on central bank buying and geopolitical risk.

• 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.

• The possibility of avoiding an economic recession is gaining strength in view of the improvement in business expectations. Although the market is pricing in the end of the period of contractionary monetary policy, geopolitical tension in the Middle East has consequences for trade and the price of oil, resulting in a spike in inflation.
• Corporate earnings releases beat expectations, but economic growth slows ("soft landing?"). A stagflation scenario is unlikely. The sustainability of the US debt makes it difficult to lower interest rates without a budgetary adjustment.
• The war between Israel and Palestine is becoming chronic and spreading in the region, while the conflict between Ukraine and Russia continues. European countries are increasing military spending and the US is seeking a pact between Saudi Arabia and Israel to focus on the Asia-Pacific region in its struggle with China.