Europe

Introducing our Special Series to assess where Portugal, Italy, Greece, and Spain stand today. Stay tuned for more.

Aggressive monetary tightening has always led to recession, although the timing is uncertain. The effects of high interest rates are starting to be felt. Investors should stay risk off and buy government bonds as a safe haven investment with carry.

In this Strategy Outlook, we present the major investment themes and views we see playing out for the rest of 2023 and beyond.

European stocks and the euro continue to weaken; soon, they will test the bottom of their recent trading range. Which sectors can protect investors against this downdraft?

We continue to expect Brent crude to trade just above $101/bbl in 4Q23, and to average $118/bbl in 2024. Higher volatility looms. We expect Russia will cut oil production next year as part of a concerted effort to undermine Biden’s re-election. Oil-demand volatility is set to rise in response to divergent policy imperatives. We continue to favor equity exposure to oil and gas via the XOP ETF; direct exposure via the COMT ETF, and long Dec23 $100/bbl Brent calls. We are getting long Jan-Feb-Mar 2024 Brent futures vs. short the same months in 2025 expecting steeper backwardation as inventories draw and markets tighten.