Equity change: reduce energy, increase financials and industrials
With the increase in oil prices following the sanctions on Russia, we believe energy stocks’ share prices now capitalise in most of the upside from higher energy prices. We believe the oil price has risen high enough to equilibrate demand, but with the prospect of severe and sustained lockdowns in China there is the risk of lower oil demand and falling prices, so we’re taking profits on most of our remaining energy exposure.
We’re increasing our exposure to financials. While the banking outlook is not strong, insurers are increasing premiums due to the increased costs of natural disasters, and higher interest rates will lead to higher returns on the insurance premium float. We’re using the residual capital to increase our positions in selected high quality industrial companies that are affected by short term issues that will be resolved over time. The recent falls in the prices of insurance companies indicate that the market has already factored in the impact of the east coast flooding on these stocks.
Clients who are logged in can access the updated model portfolio files and standard text from our downloads page, and will see the full details of the portfolio changes and suggestions for implementation below.
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