The stock markets begin a new quarter on Monday with several key events that will set the pace for the coming months. The new season of results that starts in the second half of July will be decisive, because it will serve to gauge whether the big technology companies that have risen like foam in the heat of Artificial Intelligence (AI) have gone too far in their escalation. But not only in this sector.
“If the figures published by the companies and their expectations are as solid as those most of them released in the first quarter, we still see an upward path in the stock markets. If not, it may be the best for the equity markets. values in 2023 is already behind us”, comments Juan José Fernández-Figares, director of Link Gestión.
“The evolution of the stock markets will depend to a large extent on how the results are. The tightening of financial conditions is going to weigh down the benefits, the unknown is to what magnitude,” says Guillermo Santos, partner at iCapital. He believes that if the negative effect is not excessive, the stock markets will spend a quiet summer, with the usual saw teeth (continuous rises and falls) linked to less liquidity typical of the summer period.
From Singular Bank they expect a moderate profit taking due to the probable economic weakening, especially in the US, to which can be added a reduction in estimates and corporate profits and a widening of credit spreads. “The tactical positioning of the quantitative management portfolios is relatively aggressive and it does not seem likely that the results of the second quarter will surprise as positively as those of the first”, warns Roberto Scholtes, head of Strategy at Singular Bank.
Deutsche Bank sees a fall of between 3% and 5%, because the S
Another determining reference will be the inflation data, especially due to the evolution of the underlying rate, since they will determine when the central banks will conclude the rate hike process. “It is a key factor for the developed economies to enter or not into recession and to determine its depth,” warns Fernández-Figares.
Investors have the July 26 Fed meeting and the ECB meeting on July 27 on the agenda, in addition to the September appointments.
The stock markets that can do better, according to iCapital and Singular Bank, are the Asian ones, which benefit from the post-Covid reopening, expansionary monetary policies and more competitive currencies. The European stock market offers more attractive valuations than the US stock market. In this last market, the big technology companies trade with demanding ratios and that is why some firms warn of the risk of sharp falls if one of the big companies disappoints with the results or with their prospects.
Singular Bank also sees a path in Spain, which could do better if the result of the elections on July 23 helps to reduce regulatory uncertainty, to which is added an attractive dividend, with many companies with returns above 5%, according to Scholtes. A new government that is more favorable to companies and markets could be well received by investors, says Fernández-Figares.
The Ibex has moved this year between the 8,369 points it marked in January and the 9,511 at the beginning of June, a level it has attacked this week.
It is also making a singular commitment to the London Stock Exchange, because prices have already discounted the most aggressive rate hikes from the Bank of England. It is a market that trades at an average PER of only 10 times and is dominated by solid multinationals, profitable and geographically diversified businesses.
“The stock markets still have an additional 5% upward run left. We expect a lateral summer, but slightly bullish, after finishing almost flat in the last three months,” says Ignacio Cantos, partner at atlCapital, who is positive with the financial sector and with health. In the latter, he trusts stocks such as Astrazeneca, Novartis and the Spanish companies Rovi and Grifols.
iCapital prefers companies with attractive valuations and growth capacity: it focuses on the financial sector, tourism and companies linked to the electricity sector.
The consensus of analysts bets on the path that companies like Logista have, which benefits from high rates, thanks to its financing line with Imperial Brands. They also have support from CaixaBank, Santander, BBVA and Sabadell, which are trading at discounts of between 15% and 57% compared to their book value.
“The financial sector with high rates and controlled delinquency is the preferred one for the coming months,” says Santos, who points to both Spanish (Sabadell and BBVA) and European entities. “German Commerzbank and Italian UniCredit have sufficiently low valuations to count on a good margin of safety and a high dividend,” he says.
UniCredit stands out among the most recommended values of the Euro Stoxx 50, together with the electric company Enel; the automobile manufacturers Stellantis and Mercedes and the technology company Infineon.
