Defensive or Cyclical – JOHCM’s Paul Wild looks at which is the right approach for investors in the current climate

by | May 11, 2023

Paul Wild, Senior Fund Manager of the J O Hambro Continental European Fund commented: “This is one area that we have changed our position on recently in light of the fact that cyclicals outperformed so much in the second half of 2022, a trend which carried over to the first half of this year.

“It is our view that much of the volatility we have seen in the market of late is recognition that interest rates have already up so much, and rising rates always comes with a lag that means we are all living in a lower-growth world, a climate we expect to continue through to the end of next year.

“Therefore, within the portfolio, we have been increasing our defensive holdings, partly because many of these stocks have been left behind making valuations particularly appealing.

“Examples of this include healthcare company Roche and many brewing stocks within consumer staples, making our decisions very opportunity driven. Whilst we are generally moving in a defensive direction, we still own some cyclicals, but these tend to be quite macro-specific, such as our luxury holdings which are set to benefit from China’s reopening.

“Overall, despite the market moves we have seen this year, we are very pleased with our rotation.”

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