‘After Peak Inflation, Growth Resilience to Matter More’ – UBS
2022.07.20 20:02
‘After Peak Inflation, Growth Resilience to Matter More’ – UBS
By Sam Boughedda
In a research note Wednesday, a UBS analyst told investors they are upgrading the consumer discretionary and consumer staples sectors and downgrading financials as they “get incrementally more defensive.”
The analyst explained that after peak inflation, growth resilience is to matter more.
“With “peak” inflation/Fed hawkishness likely to underpin H2, economic growth and relative earnings momentum should matter more for returns based on our machine learning (ML) model analysis of baseline/recession macro scenarios. However, equities are already pricing a ~40% probability of recession the next 6mo and returns have been bifurcated based on whether one materializes or not,” wrote the analyst. “Looking for better risk/reward, we get incrementally more defensive (u/g Cons Staples to o/w), selective on cyclicals (d/g Fins to u/w, u/g Cons Disc to o/w) and tilt toward quality growth (stay o/w Tech and Health Care).”
The analyst upgraded consumer discretionary to Overweight, stating that “with the
