The Consumer: Be Selective

UBS advises investors to be selective in the consumer sector, turning positive on China while remaining cautious on Europe and the low-end US consumer. The report identifies specific value in household products, luxury brands, and budget airlines but maintains an underweight rating on global autos.

Key Takeaways

• 1.European consumption is expected to be at least 1% lower than pre-conflict estimates due to high energy prices, rising interest rates, and negative real wage growth.
• 2.UBS is turning more positive on the China consumer, driven by a recovery in the property market (60% of household wealth) and the end of deflation.
• 3.The global auto sector is underweight due to structural headwinds from Chinese competition and high costs associated with the EV transition.

Table of Contents

• The Consumer: be highly selective.
• The European consumer...mounting headwinds
• Other headwinds for the European consumer stocks:
• Where are the pockets of value:
• China consumer
• Spain – a port on a storm in Europe for the consumer.
• Underweight global Autos.
• Low-end US consumer looks set to disappoint
• Screens.
• Appendix

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