César Pérez Ruiz, Chief Investment Officer, Pictet Wealth Management on Pricing power companies, Commodity currencies & Real estate investment trusts (REITs).

1. Pricing power companies

Rising prices around the world have created an inflationary environment with little room to hide. As rising production costs threaten company margins, brands with pricing power should be well positioned to preserve their margins and sustain earnings growth. These effects could also trickle down to some same-category companies, which can benefit from higher prices set by pricing power leaders, even as it creates a feedback loop for rising inflation. This is in line with our 2022 The great resignation theme, as higher input prices including wages, contribute to a rising consumer price environment.

2. Commodity currencies

Currencies from secured commodity producers like the Norwegian krone and Canadian dollar will play a part in the eventual solution for Europe’s energy independence from Russia. The Norwegian krone is further well positioned given the hawkish Norges Bank. This goes with our 2022 Income repression continues investment theme around the search for income in a low-yielding environment as high-quality cyclical currencies can offer an attractive interest rate for holding them and can also provide portfolio diversification benefits.

3. Real estate investment trusts (REITs)

Some asset classes, including real estate, have a strong positive correlation with inflation. REITs provide investors one way of accessing this asset class and could perform well if recession fears do not materialise.