We move on to the China-US technology war: how to take advantage of it, according to Bank of America
China Y USA have finally signed the Phase 1 trade agreement, and now markets are wondering when they will start negotiating Phase 2. There are many expectations set in this new round of negotiations, although Donald Trump He has taken charge of lowering them … until the presidential elections of November pass. It will be at that moment when the negotiations really begin, and the experts predict that it will happen then from the commercial war to the technological warfare.
That is the forecast made by experts from Bank of America, who believe that despite the relaxation of tensions arising from the confrontation between the US and China that will occur as a result of the signing, we must not lower our guard. "Given the likelihood that the conflict between Beijing and Washington will intensify again after the presidential elections," the US entity believes that the trade war will become a technological war that will return uncertainty to the markets.
And it is that both powers have left for this second phase of the negotiations the more thorny themes. For example, the US and China will have to talk about the industrial policies of the Asian giant (with special attention to subsidies), but also about the possibility of equal treatment of US companies in the Chinese market, which would mean eliminating existing non-tariff barriers.
They have also agreed to negotiate a China's largest opening in areas such as the Internet, data or the service sector, in addition to continuing to cut the tariffs imposed by both parties during the escalation of tensions. Likewise, they must agree on the mechanism for applying everything agreed so far.
Issues all of them that can unleash new tensions. That is why from Bank of America they advise a total change in portfolios facing this 2020. It has modified its advice on several sectors, so that it has gone from overweight to neutral in the case of technological, or from neutral to overweight in the case of industrialprecisely because of how the progress of the talks between Beijing and Washington will affect them. The experts of the entity have improved the industrial sector by the indications that point to a "turning point" in the manufacturing sector (which has had very poor performance in recent months) and by the progress between the two powers
On the other hand, the expectation that the commercial war becomes a technological war makes the actions of the technology sector less attractive, in the eyes of the Bank of America analysis team. Among the titles that he advises to buy without thinking about it are also those related to the financial sector, those of companies of discretionary consumption or those of companies of public services.
With a neutral advice they keep the service sector from communicationthat of health and that of Energy, and advise underweight the real estatethat of basic consumer products and that of materials.
THE END OF THE INVESTMENT AS AND HOW WE KNOW
The Bank of America experts also affirm that given the macro-trends that affect the markets, everything indicates that "The investment as we know it will come to an end". And it is that localization, as opposed to globalization, will have important implications for global growth. The transition to "stronger local and regional economic ties after three decades of economic growth fueled by the benefits of globalization" has begun, says the bank.
Also, the analysis team of the US entity expects changes in the behavior of companies due to the "influence of moral capitalism", so you will go from looking for short-term benefits to long-term growth." ESG criteria (environmental, social and good governance) will help identify cases of long-term growth, "says Bank of America.
Finally, he notes that the shares will "easily" exceed fixed income in 2020, so the traditional idea of allocating 60% of the portfolio to shares and 40% to bonds "does not seem to be able to survive" . This year, bank experts expect modest gains in US stock exchanges and higher increases outside the country. "Emerging markets and Europe could offer more rebounds than Wall Street", comment. In fact, they point out that there are "three strategic rotations" that point to a change in investments: from growth to value (growth / value), from companies with higher capitalization to those with lower capitalization, and from the US to the rest of the world.
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