Overly loose fiscal and monetary policy during Covid-19 was a “mistake,” according to the chief investment officer of asset management firm Antipodes Partners. Jacob Mitchell told CNBC’s “Street Signs Europe” Friday he expects to see a flip back to central banks “loosening policy aggressively” within 12 to 18 months to deal with the recessions set to hit most major economies. “It’s mathematically certain that inflation has to fall. I think, though, we’re probably in a different regime where we have to expect greater volatility around not just inflation but economic growth,” he said. Mitchell continued: “When you look at S & P earnings today, analysts are still forecasting growth next year which is surprising given it most likely looks like we will be in the middle of recession.” “You tend to get, with inflation being a little bit stickier and more volatile, you’ll also have big swings in operating leverage. Upswings, which we had in Covid, and downswings in recession. So we think there’s a fair amount of downside on the S & P EPS [earnings per share] numbers.” Mitchell said he believed the headwind for growth stocks from the normalization of real rates had likely passed, and shared some of the “resilient growth businesses” he was picking to navigate the tougher economic environment. They include a cluster of enterprise resource planning, or ERP, software names such as Oracle and SAP . “They are much earlier in their adoption of, let’s call it transition to the cloud, versus companies like Salesforce , the front office. So back office is getting that growth later, right now actually. So I think that’s a more interesting place,” he said. The company also has investments in more cyclical businesses in industrials and materials, which he said were priced in for a hard landing in Europe, but not yet in the U.S. That includes Siemens , despite the recession widely predicted in Germany. Mitchell expects the company to benefit from the planned energy transition in both renewables and reshoring, and said it had reorganized its portfolio toward more defensive growth assets. “The digital industries business is a really good software-hardware factory automation business, and decarbonization is all about reengineering supply chains. It’s actually rebuilding the entire global manufacturing for autos, switching it to EVs. So a lot of investment is required, and Siemens I think benefits from that,” he said.
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