(Finance) – Bank of America (BofA) is overweight on defensive stocks in European equitieswhich are expected to benefit from the slowdown in global growth in the first half of 2025.
The two main ones overweight sectoral they are food & beverages And pharmaboth of which have underperformed as risk premiums have fallen to multi-year lows, but should benefit if risk premiums begin to widen. Among defensive stocks, it is also overweight on utilitieswhich tend to benefit from widening risk premiums and lower bond yields, and is marketweight for the market telecomas the 20% outperformance since May leaves the sector already pricing in a significant slowdown in growth, as does the softwaregiven that the recent strong run means the sector is already pricing in the decline in bond yields that are assumed in the base case.
Also, BofA is underweight on financialvulnerable to slowing growth and widening risk premiums: Financials have been among the strongest performers in the European sector this year, supported by rising bond yields and relentless compression of risk premiums. However, they should start to come under pressure if slowing global growth leads to widening risk premiums and falling bond yields. The banks are among the leading underweights in the sector, with macro assumptions implying underperformance of more than 10% in the coming months. We also see scope for significant underperformance for insurance and diversified financialespecially given the recent excesses with respect to their macro drivers.
BofA is also underweight on stocks cyclical overall, but appreciates those cyclical sectors that are over-pricing global growth concerns. THE capital goods they are one of our leading underweights in the sector. He also sees a decline for i construction material after the recent strong run. However, balance the overall defensive positioning with cyclical overweights in the semis and ins luxury goodas both sectors have significantly underperformed due to China-specific concerns this year.