Update on The Markets with Davide Chiantore
Recent weeks have seen some major rebounds in equity markets, especially in certain sectors such as US tech. This suggests that optimism is slowly returning among investors.
Therefore, it could be cautiously thought that a period of stability is coming about, with a potential recovery phase ahead, at least in the short- to medium-term.
A realignment of prices is being seen in the bond world, with a narrowing of spreads between government and corporate bonds, particularly high-yield. This generally happens when there is a greater flow in liquidity and investors present a more aggressive appetite. There could be significant buying opportunities, especially in certain markets like the Swiss equity market where prices are now comparatively low when considering that solid companies have demonstrated growing balance sheets. However, attention must be paid to the Russian-Ukrainian conflict situation, as a solution is not yet in sight.
As far as inflation is concerned, a turnaround should be around the corner, starting with some sectors such as electronics where a reduction in price pressure has already been felt. A turnaround might also be underway thanks to a return of production from countries like China, which is starting to export goods all over the world, and the policies that multinational companies have implemented. A reduction in inflationary pressures and a return to normal levels in terms of company supplies have also been seen. It is assumed that this massive growth in inflation is coming to an end or has peaked. It is believed that as a result, Central Banks may also slow down their rate hike, creating some relief among all investors.
Some interesting investment opportunities are also present in the German market.
Siemens and VW are very undervalued in the automotive sector and BASF in the chemical sector. Interesting buying opportunities are seen for these companies as the purchase prices are very low in relation to the strength of the balance sheets. The risks are lower than the prices might suggest.
Reducing exposures or lightening portfolios especially in the equity sector is not recommended, especially considering that in the short- to medium-term companies are very efficient at capturing inflationary increases by passing them on to consumers. Although it remains a volatile situation, there could be a great opportunity in the equity sector, since at these prices there are more upside risks than downside risks. There is confidence that a recovery could be seen in the coming months, leading to a return to the levels of the beginning of the year.