Heavier focus on value

The recession that is expected on many capital markets is not reflected in current economic indicators. “In the coming months, however, we expect the dynamics of global economic growth to slow down”, Gerlinger explained. As part of the equity portfolio orientation, value stocks were therefore weighted higher, while the growth segment and small caps were reduced.

In the US, companies have still been reporting good corporate earnings for the most part recently, but the outlook has become more cautious. Due to the recent price declines, valuations of US equities have come back quite a bit, but are still above the long-term average. The US will therefore be slightly reduced and Europe ex Euroland increased.

Europe continues to experience the most economic damage caused by the sanctions against Russia. The region is suffering more from the rise in energy prices and the supply chains that continue to be interrupted. Nevertheless, order books in Germany and throughout Europe are still well filled and waiting to be processed. “It is encouraging that supply chains are showing slight signs of easing”, Gerlinger opined. According to Gerlinger, “European equities are suffering from the Ukraine war, but could benefit significantly from a counter-movement” because European equities remain more favourably valued than US equities. Within Europe, Gerlinger continues to see good opportunities in the UK: “Due to its index heavyweights in banks, healthcare and commodities, this market offers great opportunities.“ Banks benefit from rising interest rates, the healthcare sector is frequently favoured by investors, particularly in difficult stock market phases. In terms of commodities, the UK equity market now has a higher weighting in commodities than emerging markets.

In the emerging markets, the South American equity market has benefited significantly from rising commodity prices. “South America remains attractive. Its equity markets have seen the strongest earnings revisions in recent months”, Gerlinger added. The Chinese central bank continues to pursue an expansionary course and supports the economy with a higher credit supply, lower reserve requirements and possibly upcoming key interest rate cuts. This procedure is intended to mitigate the economic impact of the lockdown and to present better “framework conditions” at the major party congress that will be held in November. “Due to increasing stimulus programmes to combat the economic damage caused by the still restrictive Covid policy, the chances of a market recovery in China have increased”, Gerlinger concluded.

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