- Rampant inflation, rate hikes and the energy crisis have recently dragged European stocks down.
- Banks like BlackRock, Goldman Sachs and UBS predicted a recession for the Eurozone.
- UBS has shared 23 high-quality stocks to buy to help investors manage rising volatility and risk.
Across the pond, Europe has been afflicted by the same set of woes that have plagued the US economy. Soaring inflation and a subsequent series of rate hikes have combined to decimate equities in recent months.
Notably, the value of the Euro and British Pound have fallen, bringing the two currencies almost on par with a rapidly appreciating dollar. Adding to its problems is the fact that Europe has borne the brunt of the energy crisis resulting from the Russian-Ukrainian war since the war began in late February.
“Europeans are very dependent on Russia for oil, but they are much more dependent on Russia for their national gas. Everyone realizes the magnitude of the problem,” said Ross Hendricks, then vice president. from fintech EnergyFunders, to Insider earlier this year. Hendricks specifically pointed out that Germany, which imports 40% of its gas supply from Russia, is in a poor position to deal with rising energy prices.
Overall, this combination of headwinds has heightened fears of a recession, and analysts are beginning to issue warnings of a downturn ahead. In August, Goldman Sachs announced that there was a 60% chance of a recession hitting Europe in the next 12 months, compared to a 30% chance of a recession in the United States. And according to UBS, energy prices are set to push countries like Germany into recession, with analysts at the bank predicting negative growth in the third and fourth quarters of 2022 in the euro zone.
“Inflation risks remain tilted to the upside, in our view,” wrote a team of UBS strategists in a report released earlier this month. “Gas rationing, weather conditions and policy mistakes – excessive tightening by the Federal Reserve and the European Central Bank – are some of the main risks, which could have a negative impact on growth and markets in worst-case scenarios, especially for Europe.”
23 high-quality actions to weather the storm
But just because there are storms ahead for the European stock market doesn’t mean investors should stay away completely.
In the same report, UBS analysts shared their 23 best stock buys to help investors hedge near-term risks, uncertainty and volatility in the European economy.
“Our best buy ideas are quality compounds, positively adjusted to macro risks with structural drivers intact, despite growth or inflation,” the team wrote. “Most importantly, we focus on valuation, what stocks are currently discounting and where the market may have misjudged the opportunity ahead. In today’s markets, with a mix of risks ranging from conflict to stagflation, we are back to basics.
The full list of UBS’s top 23 high-quality European stock picks is below, along with each company’s ticker, key themes and drivers, and catalysts.
- Rampant inflation, rate hikes and the energy crisis have recently dragged European stocks down.
- Banks like BlackRock, Goldman Sachs and UBS predicted a recession for the Eurozone.
- UBS has shared 23 high-quality stocks to buy to help investors manage rising volatility and risk.
Across the pond, Europe has been afflicted by the same set of woes that have plagued the US economy. Soaring inflation and a subsequent series of rate hikes have combined to decimate equities in recent months.
Notably, the value of the Euro and British Pound have fallen, bringing the two currencies almost on par with a rapidly appreciating dollar. Adding to its problems is the fact that Europe has borne the brunt of the energy crisis resulting from the Russian-Ukrainian war since the war began in late February.
“Europeans are very dependent on Russia for oil, but they are much more dependent on Russia for their national gas. Everyone realizes the magnitude of the problem,” said Ross Hendricks, then vice president. from fintech EnergyFunders, to Insider earlier this year. Hendricks specifically pointed out that Germany, which imports 40% of its gas supply from Russia, is in a poor position to deal with rising energy prices.
Overall, this combination of headwinds has heightened fears of a recession, and analysts are beginning to issue warnings of a downturn ahead. In August, Goldman Sachs announced that there was a 60% chance of a recession hitting Europe in the next 12 months, compared to a 30% chance of a recession in the United States. And according to UBS, energy prices are set to push countries like Germany into recession, with analysts at the bank predicting negative growth in the third and fourth quarters of 2022 in the euro zone.
“Inflation risks remain tilted to the upside, in our view,” wrote a team of UBS strategists in a report released earlier this month. “Gas rationing, weather conditions and policy mistakes – excessive tightening by the Federal Reserve and the European Central Bank – are some of the main risks, which could have a negative impact on growth and markets in worst-case scenarios, especially for Europe.”
23 high-quality actions to weather the storm
But just because there are storms ahead for the European stock market doesn’t mean investors should stay away completely.
In the same report, UBS analysts shared their 23 best stock buys to help investors hedge near-term risks, uncertainty and volatility in the European economy.
“Our best buy ideas are quality compounds, positively adjusted to macro risks with structural drivers intact, despite growth or inflation,” the team wrote. “Most importantly, we focus on valuation, what stocks are currently discounting and where the market may have misjudged the opportunity ahead. In today’s markets, with a mix of risks ranging from conflict to stagflation, we are back to basics.
The full list of UBS’s top 23 high-quality European stock picks is below, along with each company’s ticker, key themes and drivers, and catalysts.