Q4 2022 was the first quarter of YoY profit declines for the United States, while Europe has held up better. In the United States, Big Tech-related sectors are suffering the most and we confirm a cautious view. In Europe, earnings resilience is keeping valuations at attractive levels despite the strong stock market rebound since late September. As long as the soft-landing scenario prevails, the European market could be considered as a wildcard for international equity portfolios.

Rally fatigue: dichotomy between markets and economy too wide

The year started with a rally mood amid short covering and the return of retail investors’ risk appetite. There were some supporting reasons for the situation, at least in Europe and China, where lower gas prices and China reopening helped to remove some of the downside economic risks that were on the table last year.

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