Plenisfer’s 2022 Outlook

Looking at the current and future scenario, we remain cautious in terms of overall risk  taking. Some long-standing trends, such as energy crisis, deglobalization and the need for  income redistribution, support a risk of persistently high inflation. The crisis in Ukraine has  accelerated certain dynamics, generating a scenario of lower growth (especially in Europe)  and structurally higher inflation. We think the best approach is to strictly monitor the overall  risk level in our portfolio. Currently, our equity beta is lower than 0.3.

In our view, the market is underestimating the possibility of wage increases further fueling  inflationary trends. In Plenisfer, we believe inflation will remain higher than the pre-Covid  environment and that it will last longer than markets expectations. Moreover, we think that  the probability of an outright stagflation scenario has significantly increased, especially in  Europe, although it does not represent yet our base-case scenario.

The risks associated with the conflict in Ukraine and with rising inflation, driven by rising  input prices (energy and labour), will have a dual effect:

1) they will squeeze corporate margins and profits and reduce consumers’ disposable  income, leading to lower consumption and growth, with unfavorable impacts on  equities;

2) from a fixed income perspective, we expect current valuation levels to remain an  issue, in a context characterized by rising rates and slowing economic growth.

In terms of global opportunity set, we think equity remains more interesting than the Fixed  Income sector on a relative basis, especially over long-term horizon. At the moment, we are  focusing on those businesses which will be able to transfer the input prices increase into  sales prices, thus defending margins. We continue to favour a position in Real Assets: the  energy transition is even more relevant than before, with an increased need in investments  for traditional and new source of energy. Industrial commodities are also essential to the  energy transition: we remain positive on platinum and copper, which can also be invested  through mining or mining-related companies.

With high uncertainty and volatility, gold has returned to its traditional function as a store  of value and a source of portfolio protection. At Plenisfer, we use gold as an important  stabiliser for our portfolio, especially in the current inflationary scenario.