June 16, 2022
18:38
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ING Belgium advocates defensive equities and commodities in the second half of the year, but is reducing its exposure to real estate. ‘More often than not, interest rate hikes lead to a recession.’
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“China is already in recession, and growth in the US and Europe is also likely to come to a halt soon,” ING chief economist Peter Vanden Houte opened his speech about the growth prospects of the global economy. Various disruptions in the economic chain lead to economic stagnation.
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Beijing’s zero-covid policy is likely to disrupt the supply chain for some time to come, at least until President Xi Jinping’s re-election later this year.
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Second, there is the energy shock from the war in Ukraine, although it does not affect every continent equally. The US is a net exporter of energy and, thanks to its own production of oil and gas, can better control price increases. Europe is much more dependent on energy imports. Our historically high inflation is therefore much more ‘energy-driven’ than in the US.
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Expensive energy is here to stay
Vanden Houte thinks that prices for gas and oil will remain high for a long time to come. “A quick solution to the Russian-Ukrainian conflict is not in sight. If Moscow turns off the gas tap completely, the gas price will shoot a lot higher. And expensive energy is already weighing heavily on the economy.’
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China is already in a recession and growth in the US and Europe is also likely to come to a standstill soon.
Peter Vanden Houte
Chief Economist ING
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Oil also threatens to remain expensive for a long time, says Vanden Houte. ‘We see that the oil companies – unlike in the past – are not simply prepared to increase production when prices rise. The climate transition is in full swing. As a result, oil companies are averse to new investments, because they can no longer be written off.’
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ING’s strategists see that the companies’ order books are still well filled, which offers the economy a buffer. And after two corona years, tourism is also running at full speed again. European growth will slow down after the summer, ING economists predict. Strategist Steven Vande Pitte is realistic: ‘Central bank interest rate hikes have more often than not led to recessions.’
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bond markets
“This ‘year of the hawk’ is only halfway through, but bond markets are already anticipating a tightening policy for the rest of the year,” says Vande Pitte. Bonds are gradually offering attractive returns again.
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Equity markets have already been heavily depreciated. Are there buying opportunities? Vande Pitte is wary: ‘Many technology stocks have fallen sharply, but that does not mean that tech is already cheap.’
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In addition, the vast majority of analysts are still optimistic about corporate earnings, which have held up well. But now we see more and more often that profit margins are coming under pressure. Will companies be able to continue to pass on their increased costs to consumers? That is doubtful.’
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That is why the ING strategist is advocating value stocks more than ever. These are shares that are valued cheaply in relation to, for example, their historical profit or their dividend paid. ‘These shares have already outperformed the market this year and are often still attractively valued.’ If you want to protect yourself against persistent inflation, it would be a good idea to look at commodities. ING still sees sufficient ‘upside’ in energy values.
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Defensive sectors such as health must also be able to outperform the market. ING strategists are cautious about real estate: ‘The real estate market is cooling off sharply in various countries. ING is reducing its exposure to real estate.’
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