(Alliance News) - Barclays tipped energy, travel and leisure stocks as its "top picks" on Wednesday, with analysts at the bank also tipping inflationary pressures to recede.
It has been a busy year so far for global markets. London's FTSE 100 has advanced 2.4% so far in 2022, despite inflation-related worries and central bank tapering plans spooking markets.
"Markets have moved a long way in a short time year-to-date, and it may be reasonable to expect a pause after the shake out," Barclays said.
"Our rates strategists believe the bulk of the rise in nominal yields is done now, sticking to their 1.75% year-end target on the US 10-year. Along with supportive Q4 earnings and cleaner positioning, we think this will help equities rebound."
More recent consumer price index data "may keep investors and central banks nervous", Barclays said, though it added that it has noticed "tentative" signs of supply chain bottlenecks ebbing.
Barclays added: "Lower inflation ahead would mechanically help lift real rates further, even without a move in nominals. We thus believe that in a broader and more sustained reopening post Omicron, a value/cyclical/reopening tilt remains warranted, although the growth/quality space is looking oversold in the short term.
"Energy, travel & leisure, autos, industrials remain our top picks, as well as healthcare amongst defensive growth. Banks look technically toppish near term, and we would not chase at current levels."
In London, British Airways parent International Consolidated Airlines Group SA has risen 15% so far in 2022, in a sign of Omicron-related optimism. Cineworld Group PLC, another "reopening tilt", has climbed 22%. Among energy stocks, British Gas owner Centrica PLC has risen by a more modest 2.1%.
By Eric Cunha; ericcunha@alliancenews.com
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International Airlines (IAG)
Centrica (CNA)
