Investing: “We are waiting for the storm” – Investing

As Kasper Elmgreen, “Head of Equity” at asset manager Amundi, reminds us, the conditions for investing in European equities are difficult at the moment. Banks, consumer goods and building materials are the best opportunities, as well as some growth stocks that have been heavily discounted.

We had the opportunity to meet with Casper Elmgreen during the Amundi World Forum which took place in early June in Paris. In 2019, the man became head of equity investment at a French asset manager after holding similar positions for nearly 15 years at Scandinavian asset managers BankInvest Asset Management and Nordea Asset Management. Today, he also manages the Amundi platform for European, Japanese and global equities. For Trends-Tendances, Casper Elmgreen dwells on the state of the current financial markets and points out the various opportunities they offer.

We had the opportunity to meet with Casper Elmgreen during the Amundi World Forum which took place in early June in Paris. In 2019, the man became head of equity investment at a French asset manager after holding similar positions for nearly 15 years at Scandinavian asset managers BankInvest Asset Management and Nordea Asset Management. Today, he also manages the Amundi platform for European, Japanese and global equities. For Trends-Tendances, Casper Elmgreen dwells on the state of the current financial markets and points out the various opportunities they offer. TRENDS-TRENDS. How do you assess the current situation in the financial markets? Casper Elmgreen. Stock markets tend to anticipate the development of the economy. However, the context is very uncertain at the moment, with very significant differences depending on developments that may occur in the coming months, whether in terms of monetary policy, developments in geopolitical tensions, or supply issues. Today, there are many factors that can plunge Europe into recession. But at the same time, the continent could also avoid bad news if a quick deal is reached in Ukraine. Today, there is little indication that the economy will suddenly collapse, and earnings expectations are still very stable. But in this uncertain environment, it’s no surprise that stocks are struggling to post positive returns. I feel like we’re waiting for the storm to break. How do you think the situation is developing? The question that needs to be asked today is whether the risks were well integrated into the valuations after the 35% price cut from the peaks reached during 2021. some companies to what is now an attractive level, and there are clear opportunities for active managers. But subject to selectivity. In this context, which sectors do you prefer? The banking sector will benefit from the increase in key rates, and the end of the negative rates charged by the European Central Bank will be an important support for the sector’s profits. The current crisis is not a financial sector crisis, and we especially appreciate the big network banks, which have spent much of the last 10 years making themselves less systemic. We also like stocks that are cyclical and more domestically oriented, such as low-cost airlines or the leisure sector. Finally, the building materials sector should be given preference due to the ongoing budgetary policy (“Green Deal”, etc.). Should value stocks still be favored? Good cyclical stocks and value style have performed well compared to growth stocks since the beginning of the year. We believe this marks a change in direction after a very long period of outperforming equities driven by low key rates from major central banks. Value shares remain attractively priced and should generally benefit from increased investment in the energy transition. But growth tech stocks have been so devalued in recent months that opportunities can now be found in this segment, even if the big-loss groups remain under pressure for a while longer. And, tellingly, for the first time, we have the opportunity to invest in technology stocks in our value funds. With regard to this question, will the timing of the various infrastructure plans reduce macroeconomic uncertainty? In contrast to the stimulus plans put in place in the United States, which basically lead to should effectively counteract the effects of the economic downturn. What you should pay attention to in the current conditions: very threatening clouds are gathering over the European markets today, which requires us to be very selective. Particular attention should be paid to the financial position of companies and their ability to protect their margins through the dominance or strength of a brand or patent. A sharp increase in inflation will have very different effects depending on the companies in the same sector. Corporate reporting has become a bit more cautious since the first quarter results and I expect increased volatility to have more of an impact on the results as their reporting season kicks off in the next few days. Consumers are also adapting their habits by buying fewer or cheaper brands. And what about energy prices? Significantly increase production. And it looks like we’ll still need oil for a little longer than expected. The biggest risk for oil is that its high price will trigger a recession that could lead to a sharp drop in demand. Is Europe’s drive for autonomy an opportunity? Increasing European autonomy in sectors such as energy or defense will require significant investment, especially if there is now the will to accelerate this transition. For investors, this process will mean significant opportunities if they manage to position themselves in companies that offer solutions. However, this is a long-term opportunity that will create better conditions for attracting private capital. For example, if Europe is to develop semiconductor manufacturing capacity, power needs to be secured, as it takes four to eight weeks to restart a component manufacturing plant, and power outages have astronomical consequences for the profitability of such a plant. .

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