PARIS, December 6 (Reuters) – The soft landing of economies in a context of restrictive rates should encourage the selection of companies capable of withstanding higher financing costs, whether for equity or credit investments , according to Oddo BHF’s 2024 outlook.
Rates have reached a plateau, not a peak, the asset manager warned during a press conference: monetary policies will remain at restrictive levels for longer than the markets anticipate, without however causing significant recession. Growth in the euro zone and the United States should reach between 0% and 1% next year, estimates Oddo BHF.
This context of more restrictive financial conditions and slowing activity will raise the question of debt sustainability for many companies, pushing the group to select securities less exposed to refinancing risks for its diversified funds.
On the equity side, Sophie Monnier, senior product specialist, explains that the group favors a quality bias and international companies, less exposed to a single economy.
The shares held by the group’s diversified funds reach on average a level of leverage (debt to Ebitda) of between 0.3 and 0.8, compared to an average of 1.3 for international equity indices.
European credit is the other compartment favored by the group, which believes that American credit, historically more profitable because it is more risky, no longer offers sufficient returns. Moody’s therefore forecasts an increase in defaults to 3.7% over 12 months for Europe, compared to 4.3% in the United States.
However, there remain areas of risk in European credit: certain sectors have suffered more from the rise in rates – real estate accounts for 57% of the region’s discounted debt – while the negative outlook from rating agencies is concentrated on fragile, category B and CCC securities.
Oddo BHF therefore recommends favoring less indebted sectors and preferring high-yield securities with a short maturity, less sensitive to a further widening of spreads and offering attractive remuneration.
The group finally exposes itself to sovereigns for their role of protection rather than yield.
“Given the debt levels of European economies, we consider that we are not sufficiently remunerated for risk, particularly for peripheral countries,” notes Philippe Vantrimpont, senior product specialist.
“However, we are exposed to German and American securities, which are safe and which offer coverage in the event of a deterioration in the economic situation.” (Written by Corentin Chappron, edited by Blandine Hénault)
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