Markets under pressure: where, when and how to invest?

Do markets stagnate under pressure at low levels? How should an investor behave in such a context? “We see that the markets tend to overreact. The economic situation does not justify such a fall. This is a short-lived situation. The markets are not always rational. You can say that those who buy today in the stock market are not mistaken. In time, he will not regret it.” , says Etienne de Callatai, co-founder of Orcadia Asset Management. If we analyze the situation in the US, we will see that it is the market that is the most expensive. But in the S&P 500 we have the weight of a few big investments. However, in the U.S. mid- and small-cap segment, “price-to-earnings ratios” (price-to-earnings ratios) are lower than they have been in the last 20 years. Thus, there are still pockets of attractiveness in the markets.

Note that stocks are indexed for inflation. An investor with a well-diversified portfolio across sectors and regions should be well protected from the effects of inflation. “Investors have outweighed certain pockets like tech stocks or growth stocks. Many of these companies have become too expensive. When interest rates rise, these companies will be fined. But there are good quality stocks that have fallen. This is a buying opportunity. .” adds Frank Wranken, chief investment officer of Edmond de Rothschild.

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Prefer dividends?

It is probably appropriate today to focus on stocks that offer good dividends. Companies that are able to factor in rising costs into their selling prices may also be viewed in a favorable light when making investments. “Today we are in a gray area. There is no visibility in the markets. We may question the veracity and compatibility of companies’ reported earnings with expected economic growth.” , notes Lionel Henrion, senior manager of wealth management at Banque Nagelmackers. There are also several catalysts that can have a significant impact on investment. There is, of course, the evolution of the Russian-Ukrainian war. On the sidelines of this conflict, it will be necessary to monitor the development of inflation, as well as closely monitor what is happening in China. Investor sentiment is not the best today. This can be seen as a buy signal. To boost confidence, a positive catalyst is needed that would cause a rebound in the markets. Such a catalyst could be, for example, an improvement in the situation in the Russian-Ukrainian conflict.

But then, today, what kind of investments can we move towards? “We can focus on defensive sectors and companies that have the right to determine their selling prices. We find insurance, health or consumer durables in this segment. Even if they are cheap, we have to be careful with technology stocks. The same goes for discretionary consumption. or luxury companies. We also need to be more restrained towards the eurozone, which is more sensitive to the war in Ukraine.” advises Cedric Hayen, Senior Communications Manager at NNIP Belgium.

There is one point on which the four speakers are unanimous: crypto assets. These assets create nothing, cannot be assimilated into currency, and often finance illegal activities. Equal to casinos, these operations also have a terribly harmful effect on the environment due to the way they are carried out. The recent drop in these assets clearly demonstrates Warren Buffett’s adage, “When the tide goes out, you see those swimming naked.” The four industry experts also question the inertia and carelessness of central banks towards these crypto assets.