Our investment strategy recommendations for November by Florent Brones
The market consolidation in October does not jeopardise the major factors that have been driving the upward trend in the stock markets for 10 years.
The market consolidation in October was due to a combination of factors: the downward revision of the future growth rate of corporate profits shows that the peak in the earnings cycle has been reached in the United States. Moreover, US bond yields rose. Finally, political risks are still present (trade tensions between United States and China, Italian fiscal policy, Brexit). The short term remains uncertain, but negotiations will resume in all these three cases, in our view.
This consolidation does not jeopardise the major factors that have been driving the upward trend in the stock markets for nearly 10 years. Profits continue to rise, interest rates remain historically very low as inflation remains low, and stock markets are not too expensive. This consolidation is an opportunity to reinforce positions if necessary.
Our regional equity recommendations remain unchanged for the eurozone and Japan (we are positive). We are neutral on the United States, the United Kingdom and Switzerland. Within the eurozone, we focus on cyclical sector bets (banks, materials, oil, industrials, telecom equipment) and the very late "Value" theme. We become buyers of the pharmaceutical sector for its defensive qualities and attractive valuation. Since last month, we have been positive on emerging markets with a preference for Asia ex-Japan (China and Singapore). We add Korea and Indonesia to our list of preferred countries. We are also positive on Poland and Hungary.