April 12, 2023

Institutional Views: BlackRock, GS, Deutsche Bank

April 12, 2023

Individual investors are often bombarded with specific stock calls and targets.

However, we believe you can get a better medium to long term perspective by considering asset class, sector, thematic and macro economic views.

To help you, every week, we pour through the research produced by some of the larger institutions, and summarize their market thoughts.

Below are this week’s 3 updates:


BlackRock

Recession view reinforced by recent bank tumult. Disconnect between sticky inflation (Fed underestimating) and market expectations of rate cuts persists. Rate hike financial cracks and corporate earnings expectations yet to fully reflect a modest recession. Therefore, Underweight DM stocks (prefer sectoral approach in energy and healthcare), overweight inflation linked bonds, underweight high yield credit, favour short-dated government bonds which offer attractive income with limited interest rate swing risk. Overweight EM stocks due to China’s restart, peaking EM rate cycles and weaker USD.

 

GS

China growth forecast raised to 6.0% (from 5.5%). BoJ to adjust YCC in 2Q23 by targeting 5y yields. Tighter lending standards amid recent bank stress has resulted in: US - lowered 2023 growth forecast to 1.1% (from 1.5%) and raised 12m recession odds to 35% (from 25%). Fed to deliver 25bp hikes in May and June for a terminal rate of 5.25-5.5%. Europe - lowered 2023/24 EA and 2023 UK growth forecasts but continue to expect both to avoid recession. Except 25bp ECB hikes in May and June terminating at 3.5% due to persistent high core inflation. 

 

Deutsche Bank

Major central banks require firm evidence of inflationary pressure easing to cut interest rates. Both HY and IG Eurozone credit offer best risk/reward profile. Favour European equities – Stoxx600 & DAX 12m target lifted to 480 and 16,300. USD to continue to weaken against EUR and YEN. Property valuations in short term remain under pressure, but long term offer attractive opportunity against persistent inflation. Gold attractive - not strongly correlated to any other single asset class for prolonged periods and traditionally responds positively to financial system stress, geopolitical risks, and high inflation.

* Please note these are not the thoughts or analysis of illio but the respective institutions. We have summarized what we believe are key points. We assumes no responsibility or liability for any errors or omissions in the content of this site. The information contained herein is not intended to be a source of advice and the information contained in this website does not constitute investment advice.

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