World stock markets have started strongly at the start of the year in a sign that they may perform better after the dark 2022. that equities may somehow cushion the blow of war and inflation. The fine print is that big jumps are not expected.
Four weeks after the start of this rebound, one of the defenders of this premise is Inversis, from which they forecast moderate gains in all indices for this 2023. In any case, they believe that the “worst is over”. The macroeconomic strategist of the Banca March subsidiary, Ignacio Muñoz-Alonso, warns that although Earnings per Share (EPS) “are solid”, a downward revision has already been detected, which will lead to a cut in forecasts .
In a scenario in which the economy is entering a “turning point” and with the first signs that it is heading towards normalization after the pandemic and the Russian invasion of Ukraine, Inversis projects a reduction in world growth to 1. 7% by 2023, which would mean a smaller contraction than the first forecast and which will help most countries avoid recession. However, if it does occur, they estimate that it could be mild.
This reason leads Muñoz-Alonso to recommend undoing positions in the ‘winning’ sectors of the pandemic such as technology, energy or health and betting on more defensive companies, with a tendency to grow in the coming quarters. Among them are ‘utilities’ or basic goods, as well as those activities with the possibility of passing on the increase in costs in their final price, such as consumer services, hotels and tourism. The strategy that he defends benefits indices such as the Ibex 35, which could maintain the ‘acceleration’ of the beginning of the year. “The Ibex is an index that always does better when Europe rises, but it also falls more when the stock markets of the Old Continent do worse,” adds Muñoz-Alonso.
The firm contemplates that the moderation expectations of central banks regarding interest rates will benefit the yield of sovereign bonds, provided that the moderation of CPI rates is confirmed, which will not reach the 2% threshold at least until 2025, as planned by the European Central Bank (ECB).
From Inversis they anticipate that the ECB executes a rise of 50 basis points at next week’s meeting and another 50 before the third quarter, depending on how activity behaves. “Everything that is done in monetary currency is in price,” he points out, while stressing that the rate curves at the present time invite to take short-term positions and that a slowdown in rotation is already taking place of portfolios towards fixed income.
Regarding raw materials, he anticipates that a barrel of oil could be placed at the level of 105 dollars. China’s return to the global scene as a commodity demander may add some pressure to global inflation, but it will help restore global supply chains. Finally, they can be warned that the main global risks come from the evolution of the war in Ukraine and the tension between the Asian giant and Taiwan, whose talks are still at a standstill.