Climbing the wall of worry

Question: What international regions and sectors may offer the best opportunities?

Dariusz Czoch: So even though inflation has been declining, we still have a lot of uncertainties out there. And global investors have been climbing that wall of worry for quite some time. From region or country perspective, we do like Europe, and especially European equities. European economies and European equities have been caught in this perfect storm, caused by high energy prices, declining manufacturing, collapsing consumer confidence, and business expectations, disappointing results coming out of China. And not to mention the war that is happening on the borders. However, European equities are already discounting a lot of that pessimism. And I've been doing this for over 20 years. And one thing I know, that it always gets darkest right before the dawn. So we believe that it will not take much of an incremental positive news to help European equities re-rate from these depressed levels. Another region/country that looks interesting to us is Japan. The Japanese economy is emerging from two decades of deflationary spiral. Japanese corporates are changing as well. They're embracing a new shareholder-friendly culture. And lastly, but not least, when you look at the Japanese yen, the weakness is helping Japanese exporters in a big way. In terms of sectors or themes, we do like procyclical parts of the market. We feel that they will bottom way ahead of the market and will recover much faster. For example, when you look at staffing and recruitment companies, they typically bottom six to nine months ahead of the market. And as the market starts bottoming, they already enjoy their recovery. We also like the defense theme. We think this theme will be playing out for a long time. And these structural tailwinds will help defense companies to produce higher organic growth and enjoy much better margins in the future. And this both applies not just to Europe, but also to Japan and other countries. And the last theme we like is energy security, digitalization, automation and electrification. We think this theme will be playing out over the next decade. But one word of caution here for investors, there are many cycles within that theme, and you have to be very careful when you invest regarding the timing.