Friday, September 30

Banks and airlines to boost portfolios


Banks and airlines are two of the bets with which the portfolios will have to be overweight in order to define the strategy in 2022.

This was estimated by the economists of Bank of America in a sector report, where they also bet on insurance companies, utilities and construction materials.

Rather, they were more cautious, recommending ‘underweight’ pharmaceuticals, real estate, mining, energy, auto manufacturers and capital goods.

On a neutral note were telecommunications companies, the food and beverage sector and consumer durables.

Banks to take advantage of the rate hike

One of the investment ideas that the economists of the US entity explained are banks. “We remain overweight given our expectations that bond yields will move higher,” explained these sources.

The strategy fits with the change in tone of the speech recently unveiled by Jerome Powell. The Fed chairman set out a clear roadmap to accelerate the withdrawal of stimulus and advance the increase in interest rates.

The statistics support the recommendation, as banks began to take off in the stock market once bond yields began to rise in September of last year. The correlation between banks and bond yields is “particularly strong.”

Looking ahead to 2022, the same sources expect even greater potential for bond yields, “as central banks become more aggressive in response to inflationary pressures.”

In fact, in Bank of America take for granted that la Fed it will open the upward closure of the rates in June and they discount eight increases in the next three years, compared to the six increases that the market is contemplating right now.

“Inflation is not a bad thing for banks, especially if we start to see the possibility of a rate hike, since they are all at very low levels,” said the family office expert Alfonso Esc├írate in the podcast of closing of markets of Finanzas.com.

Airlines discount 15 percent returns

The star idea in terms of profitability for Bank of America they are the airlines, a sector that has barely discounted in their prices the “normalization” that experts expect after the pandemic.

The sector as a whole did 30 percent worse than the market since March. Recurring problems related to the coronavirus, restrictions on mobility and consumer reluctance have widened the wound, along with doubts about possible capital increases.

With the sector trading very close to its all-time lows and “well below fair value,” the momentum points up from current levels, the same sources explained. Specifically, they calculated a potential rebound of 15 percent.

Likewise, analysts contemplated that there may be more falls in oil prices induced by the strength of the dollar, which again would boost the airlines.

In addition, experts counted on a spike in vaccination rates in response to the latest waves of the coronavirus.

Precisely because of all these uncertainties, the airlines barely captured in their price the improvement in the macro outlook during the last eighteen months and it is something with which they will have to catch up with the rest of the market.

Oil companies and car manufacturers, among the sectors to watch

The opposite case to banks and airlines is oil companies, which should be underweight in portfolios. Since the end of August, the energy sector outperformed the market by 25 percent until the end of October, thanks to the rebound in oil prices.

But crude prices began to move lower in November, prompting companies in the energy sector to surrender half of their returns.

“We see the possibility that the price of oil continues to decline due to the weakening of growth in the United States and the strength of the dollar,” they explained in Bank o America.

The only risk for oil companies to do better on these forecasts is a possible weakness in the British pound. This currency is important, as half of the market capitalization of the sector is traded in the United Kingdom.

The potential for economic growth forecasts to soften led experts to underweight the automaker sector. It is a pure cyclical sector that did 70 percent better than the market between March and June of this year, driven by the rebound in PMI indicators (leading activity indices).

But since September it has lost 15 percent, precisely because of the forecasts that point to a slowdown in these indicators. In the coming months, the sector should underperform 10 percent of the market, the sources added.



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