Citi hæfter sig ved de seneste kursfald, især på teknologiaktier, og mener, der er voksende muligheder uden for teknologisektoren, især i store industriselskaber, der har været stærkt undervurderede, og som kan komme igen i det næste år eller halvandet. Det samme gælder mange medicinalvirksomheder og sektorer, der har ligget underdrejet under coronakrisen. Citi påpeger også, at high yield obligationer giver en rente på 5,5 pct. trods det generelle meget lave renteniveau.
Potential Opportunities Beyond Technology
In the past 3 weeks, the Nasdaq 100 has corrected 12% (as of 20 September). In contrast, the Russell 2000 has dropped a mere 3% while non-US shares are about flat.
The average US stock has not seen nearly the extremes of the tech-sector rally or subsequent selloff. Rather, many non-tech sectors saw their gains slow down.
Citi analysts are fundamentally positive on the technology sector and do not expect a drop in revenues. However, they are mindful of over-exuberance as Technology, Media and Telecom (TMT) shares surged to more than 40% of US market capitalization this year.
More muted equity returns from the technology can be expected over the medium-term given present valuations. With a focus on a diversified asset allocation, Citi analysts see a broader range of potential investment opportunities.
Neither recessions nor pandemics last forever and businesses impacted by the pandemic are appealing as they have fallen on a temporary COVID-19 shock.
Citi analysts see undervalued opportunities within “COVID-19 cyclicals” and prefer firms that are able to sustain dividend payments under present challenging circumstances. These provide investors with both scarce income and low sensitivity to movements in interest rates.
Pharmaceuticals offer compelling and likely dividend growth, but have underperformed year-to-date (YTD) driven by fears of US drug price regulation.
However, fundamentals are robust and near-term earnings growth could be underpinned by recent innovative product launches.
Industrials have also underperformed technology by 25% in the US YTD. Industrial conglomerates have lagged significantly and Citi analysts see rising potential upside relative to the automation space over the next 12 to 18 months.
Among US corporate bonds, Citi analysts favor select opportunities in BBB-rated debt, which yields 2.3% and spreads have scope for additional tightening.
The US Federal Reserve has also become a buyer of certain high yield (HY) bonds. This has helped HY market recover from the March sell-off. Despite the impressive turnaround, spreads are still relatively attractive with average yields near 5.5%.
Within the US HY space, Citi analysts prefer the “Fallen Angel” (FA) market – HY issuers that were once investment grade-rated.
