According to Vincent Guenzi, strategist at Cholet Dupont, “ January’s stock market correction seems to correspond to the classic market movements that occur during phases of change in US monetary policy. Historically, the rise in the indices has continued, not without volatility, until the rise in rates reaches a level such that a risk of recession appears. This is far from being the case in the near future. Moreover, the correction that has occurred is a crisis of excessive valuation of securities sensitive to the rise in interest rates. It affected less highly cyclical sectors, sensitive to the future of activity. »
This is why this expert is not worried about a risk of recession, absolutely not desired by the Fed. In addition, early signs of easing inflation are appearing, such as the drop in certain wholesale prices or the drop in transport costs. ” For these reasons, investors’ fears should not increase in the short term. They should remain patient unless Russia invades Ukraine. In the short term, the financial markets should remain wait-and-see, both with regard to inflation and the geopolitical situation.. »
A low point touched?
According to him, the indices may have already touched their low points for the quarter. A resumption of the rise is possible after a few weeks of reflection. But it assumes that inflationary and geopolitical fears are beginning to ebb. In the meantime, we must remain measured and take advantage of any downturns to increase our exposure to equities, in particular those that are undervalued. ” For the major growth stocks in luxury or technology, it is necessary to focus on those whose valuation has again become acceptable in relation to the earnings outlook. »
Vincent Guenzi raised his equity exposure slightly from 48.6% to 49.5%. Neutral in the short term, it still overweights Europe. Due to falling prices, US equities are no longer underweight. In the medium term, an overweight remains in order, with an emphasis still on the United States and Europe. In fixed income, European government bonds, highly rated US and European corporate bonds and European high yield are underweighted in the short term. In the medium term, neutrality is in order, except for well-rated European government and corporate bonds, which are underweighted.
Investing opinion
Like Vincent Guenzi, we are neutral on equities, with a preference for the “value” compartment of the rating. Geographically, the euro zone and China have our preferences.