However, in a fourth-quarter outlook report published Wednesday, Bolton suggested that stock pickers can seek to capitalize on valuation divergences across companies and regions, but will have to identify businesses that will help provide solutions to rising prices and rates.
He argued, for example, that the case for buying bank stocks has strengthened over the last quarter, as hotter-than-expected inflation reports have exerted further pressure on central banks to continue raising interest rates aggressively.Europe is racing to diversify its energy supply, having relied on Russian imports for 40% of its natural gas prior to the invasion of Ukraine and subsequent sanctions.
"The simplest way to mitigate the potential impact of gas shortages on portfolios is to be cognisant of the companies with high energy bills as a percentage of income – especially where the energy isn't provided by renewable sources," Bolton said. "The energy needs of the European chemical industry were equivalent to 51 million tonnes of oil in 2019. More than one-third of this power is supplied by gas, while less than 1% comes from renewables."
Some larger companies may be able to weather a period of gas shortage by hedging energy costs, meaning they pay below the daily "spot" price, Bolton highlighted. Also essential is the capacity to pass rising costs on to consumers.