The uncertainty surrounding financial markets has increased significantly since 11 September. It mus...
The uncertainty surrounding financial markets has increased significantly since 11 September. It must therefore be assumed that volatility and risk aversion will be high in the period immediately ahead.
Before the atrocities, our global equity portfolios were already defensive, while preserving our usual growth tilt. This more defensive position has been gradually built up over the past 12 months, as forecasts on the length and depth of the economic downturn continued to deteriorate.
Even before the attacks, we expected a further decline in consumer confidence worldwide, in the light of the sweeping job cuts at many multinational companies in all regions.
The attacks on the US have only reinforced this view. Given low forward visibility of economic and business-specific development, we are focusing on companies where earnings visibility is relatively good. We do not intend to change our defensive stance until there are clear signs of a turnaround in the economic climate.
In our sector policy, we are overweight energy. At current oil prices, oil companies are attractively valued. Given the reaction of the US to the attacks, the sector offers an important hedge against an increase in worldwide political tensions.
In materials and industrials, we expect demand trends to remain weak, leading to low capacity utilisation and price pressure.
We are also underweight consumer discretionary as we expect consumer spending on big-ticket items to suffer from falling consumer confidence and an adverse trend in personal income.
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