The economic outlook has fallen into “contraction” territory which, historically, has proven to be a poor environment for risk assets.
Valuations are “expensive”. Valuations have continued to rise marginally as analysts further downgraded their earnings expectations for 2023. Forecasts now assume an 8% contraction in S&P500 earnings, still below historical averages for recessionary environments, and we remain cautious on this measure.
Momentum for equities has returned to a positive trend. We prefer for movements of this indicator to prove sustainable over at least two months before taking any action but continue to closely monitor its development for any signs of a new bull market emerging.
Sentiment in markets remains bearish, as investors continue with a largely prudent attitude amidst continuing economic uncertainty.
As ever, we are constantly monitoring markets. Should conditions change, particularly with regards to the economic regime or signals from our valuation, momentum and sentiment framework, we will adjust our asset allocation accordingly.
In accordance with the regulations in force, we inform the reader that this document is qualified as a promotional document. Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 27/01/2023, publication completion date