Posted Jan 10, 2023, 1:59 PM
Vincent Guenzi, strategist at Cholet Dupont, anticipates a short and weak recession in Europe and the United States in the first half of the year. ” IResilience factors are still present, but the trend in inflation remains essential for central banks, which could still disappoint investors. This context should limit the progression of equity indices in the short term after their recent rebound. The conditions for a lasting rise are still not met and the potential seems to us to be very limited in the short term in Europe. The American indices, whose evolutions have been more negative, seem more affordable to us. Visibility should improve only from next spring. This is why we are still not raising our forecasts for the indices. We believe that it is not appropriate to raise the levels of equity investment in the portfolios. We recommend taking advantage of episodes of volatility and declines to do so. »
Downward revisions to the earnings outlook
This expert notes that the downward revision of earnings estimates continues: it reached 8% for S&P 500 shares and 3% for the Stoxx 600 Europe. ” This is insufficient given the expected slowdown in activity and should slow or limit the advance of the indices as long as the central banks’ pivot is not in sight (i.e. the halt then the drop in their rates). When the latter approaches, it is the rise in capitalization multiples that should sustain the progression of the indices during the course of the year. In summary, Vincent Guenzi believes that most of the decline in the indices is probably behind us, but that a downturn should not be ruled out, especially in an uncertain geopolitical context.
In the short term, Vincent Guenzi therefore remains neutral on equities. But it remains overweight in the medium term on American and European stocks, and underweight on Eastern European stocks. In terms of bonds, neutrality is also in order in the short term, except for US corporate bonds, well rated and high yield, and European, well rated, where underweighting is appropriate. In the medium term, underweighting is recommended, with the exception of US government bonds, high yield in Europe and emerging debt, where neutrality is recommended.
Investing opinion
We had recommended a month ago to take profits on equities with a Cac 40 at 6,800 points. This limit having been reached, we are now underweighted. We will wait for a new episode of volatility, and a drop in the financial markets, to advise purchases.