Sectors

The Russia-Ukraine war has prompted Europe to ramp up its defense spending. This will greatly benefit its defense industry, especially if defense coordination across the EU increases. 

The banking crisis has hit European shores and engulfed CS; is this all bad news for Europe or have the odds of a policy mistake declined?

Bank failures are another ‘canary in the coal mine’ warning that a US recession is imminent, yet stocks, bonds, and the oil price are still a long way from fully pricing it.

Generative AI is a major technological breakthrough that holds tremendous economic and investment promise and will have sweeping effects on wide swaths of the economy. We are bullish on generative AI as a long-term investment theme. However, at the moment we observe hallmarks of an investment frenzy. We believe that there will be a more attractive entry point for patient investors.

The UK economy is more resilient than was feared last year. While this will not help UK stocks, the Footsie’s long term prospects are appealing.

The first legislative meeting of Xi Jinping’s third term suggests that Chinese policy is continuous and consistent with the previous ten years, which is negative for long-term productivity.

This week’s <i>Special Report</i>, written by Miroslav Aradski, highlights the worrisome deterioration in health trends in the US, which began before the pandemic. Over the long haul, this could weigh on labor supply and productivity, put upward pressure on bond yields, and hurt equity multiples.

The combination of collapsing energy inflation and cooling wage inflation means that euro area core inflation will slump later this year. We discuss the consequences.

The equity market is back to the 2019 level on an inflation-adjusted basis. However, it is still not cheap as it is not pricing in the possibility of a prolonged and deep earnings recession or a higher interest rates regime. Many areas of the market that appear cheap, are cheap for a reason. The only industries that are cheap because they are growing into their valuations are Energy and Airlines. We are upgrading Airlines to equal weight.

This week we present our Portfolio Allocation Summary for March 2023.