Anchor Insights September 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 September 2023

Market Wrap

Stock markets are trimming, about 2-3% in developed markets and about 6% in emerging.
Multiples on average, expected profits increase.
Energy and biotech sector rise in August, all others fall.
The euro drops 1.4% against the USD.
European fixed income up, American down.
Gold is down 1.2%, oil near year highs.

Insights

Inflation picks up slightly, although core inflation continues to fall. Energy as the main cause.
Greater pessimism on supply than on demand. Consumption endures.
The Chinese economy receives more stimulus from the government.

Equity

The earnings already published for Q2 show that 80% of American companies and 53% of European companies exceed analysts' expectations. We continue to 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 higher than other sectors and cash generation in companies that have competitive advantages.
Cyclical consumption: Bottoms ahead of early cycle.
Renewables: Reducing fossil fuels inevitably leads to huge investment plans in renewable energies.

Fixed Income

Stabilization in bond yields. Although the discourse of the central banks is still belligerent with inflation, we do not expect more rate hikes than 0.25 in the remainder of the year. Traditionally, the IRR has peaked close to the peak of short-term rates.

We continue to see attractive entry 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. The reduction of liquidity in an environment of monetary tightening can increase default rate.

Credit spreads at medium levels, both in European and American bonds.
Rally in IRR in government bonds, both European and American.
High Yield in both euros and dollars can be harmed by rising default rates. BB rated bonds seem attractive.
Selectively, emerging economies with foreign debt.

Alternatives and Currencies

The euro and the dollar are within the range 1.12-1.08. Tendency to persist weakness in the USD because of monetary cycle phase.
Real estate bubble risks in some countries (Nordics, Canada, USA, Germany, UK), especially in commercial real estate.
A possible reduction in supply outweighs recession risks and metal and energy prices rise. Volatility in commodities persist, eyeing weakness in China.

01 Sep