The outlook for risk assets such as equities has deteriorated sharply. Interest rate hikes and quantitative tightening are weighing on markets, and the overall situation may remain difficult. “Historically, as long as the Fed has been in the rate hike cycle, no market low has been reached”, said Carsten Gerlinger, Managing Director and Head of Asset Management at Moventum AM. “The better opportunities are currently in non-cyclical consumption and communications stocks.”

In view of the economic outlook, valuation of equities is still ambitiously high. “In recent months, US companies have been able to pass on higher costs to their customers”, Gerlinger pointed out. “Profit margins also continue to be above average and in fact at 1960s levels, which has led to record profits.” Given the expected weaker economic growth and high inflation, however, this development will not last so that pressure on margins is to be expected. Particularly the growth segment remains vulnerable to a potential further rise in yields.

Europe is affected by the weight of sanctions against Russia and suffering from rising energy prices. “Coupled with the economic outlook, this is weighing on the highly cyclical industry in Europe”, Gerlinger added. “Small caps are suffering disproportionately from the current uncertainty.” The more favourable valuation continues to argue in favour of eurozone equities. “Relatively speaking, the UK still offers good opportunities in Europe”, said Gerlinger. “Due to its index heavyweights in banks, which benefit from rising interest rates, health care as a defensive sector as well as commodities, the market offers better opportunities than Euroland.”

Although the emerging markets are very promising in the long term, they are subject to more uncertainty in the short term and are therefore no longer as attractive as in the past. “South America is currently facing political uncertainties, especially because of the upcoming presidential elections in Brazil”, Gerlinger mentioned. “However, the continent is benefitting overall from the favourable commodities environment.”

China, on the other hand, continues to be in the wake of the corona pandemic. “The real estate sector represents the main asset class of the Chinese”, said Gerlinger. “Real estate is for the Chinese what the savings book used to be for the Germans.” The Chinese central bank is expected to continue its expansionary stance. However, this will not be sufficient for the Chinese economy to escape a more severe global economic downturn or a recession in the major Western economies.

A somewhat more defensive positioning is recommended in anticipation of an inevitable recession. Consumer discretionary, which has been underweighted so far, will be increased from underweight to neutral, and communication services will also be slightly increased. “On the other hand, we will be reducing energy and commodities from overweight to neutral”, Gerlinger concluded. “In a recession, prices of energy and commodities are likely to fall.”

Additional information is available at www.moventum.lu

Über Moventum S.C.A

Moventum Asset Management S.A. (Moventum AM) is a wholly owned subsidiary of Moventum S.C.A. Since 2019 Moventum AM manages Moventum’s own funds of funds and individual mandates as part of its asset management portfolios.

As an independent financial service partner, Moventum S.C.A. has been providing a home for financial service providers such as advisors and asset managers as well as institutional clients from all over the world for more than 20 years. The digital “MoventumOffice” platform offers access to more than 10,000 funds, ETFs and other securities. In addition, it allows financial advisors to open securities accounts for their clients, to place trading orders and to use analysis, reporting and support tools. Institutional clients are able to outsource their entire fund trading with complementary services to Moventum as part of collective or individual custody account management. A variety of fund services are assumed for asset managers, ranging from registrar and transfer agent services to fund accounting, company administration and domiciliation services.

Firmenkontakt und Herausgeber der Meldung:

Moventum S.C.A
12, rue Eugène Ruppert
L2453 Luxembourg
Telefon: +352 (26154) 200
http://www.moventum.lu

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