The last three months of 2024 must be approached with due caution.
Markets are still reeling from recent central bank interest rate cuts. These were not entirely surprising, with the latest inflation figures having created space for such measures and economic data not arguing against them.
Do not underestimate geopolitical risks
The improvement in inflation figures is largely due to falling energy prices, which at first glance do not seem to correspond with the still fragile geopolitical situation.
The price of oil depends partly on the geopolitical situation, but not only that. It also provides guidance on how the global economic situation is assessed. And in this area, the growth prospects are not exciting, which also explains the interest rate cuts by central banks.
However, geopolitical risks should not be underestimated. This is reflected better than in the price of oil in the price of gold, which is constantly reaching new highs. Interest rate cuts should also not have a negative impact on the price of the precious metal in the coming weeks.
We have already seen four major corrections of almost 10% in the last 12 months. A new relapse would not be surprising in any way.
Don’t get carried away
When it comes to stock prices, rate cuts have also had a stimulative effect. The drop in rates fuels hopes of a soft landing. The fact that a growth program was launched and presented almost simultaneously in China is also conducive to a rise in prices.
Investors should not, however, get carried away, quite the contrary: profit-taking, particularly after the American elections, would not be surprising. So it’s not a bad idea to protect any of your profits now.
It is worth remembering that we have already recorded four major corrections of almost 10% in the last 12 months. A further relapse would not be surprising in any way.
Towards defensive sectors
We maintain a neutral stance on equities and shift sector allocation towards more defensive sectors, valuing the healthcare and utilities sectors to achieve better earnings visibility, while devaluing the industrials and utilities sectors. communications due to economic uncertainty and lower earnings expectations. We added two American stocks to the portfolio, AbbVie and Stryker, as well as the Spanish supplier Iberdrola.
AbbVie’s broad and diverse portfolio in immunology, oncology, neuroscience and aesthetics ensures stable and resilient revenue streams.
Stryker’s Mako robotic system is revolutionizing orthopedic surgery, resulting in increased market share in knee replacement operations and potential growth in spinal and shoulder replacements.
Iberdrola is poised to achieve strong single- to double-digit growth in net profit by 2025, driven by its growing renewable energy portfolio and strategic investments in regulated networks in its core markets. This will allow further dividend increases.
