According to the chief strategist at UBS investment bank, global economic conditions will change next year and this is going to reverse the markets and sectors that have been underperforming. Bhanu Baweja told CNBC’s “Squawk Box Europe” on Wednesday that a third to half of the countries globally covered by banks are facing recession. “It’s an inch deep but it’s a mile wide,” he said of the expected downpour. “Global growth is at 2% and that hasn’t priced in stocks.” UBS expects November’s US core consumer price index, which excludes volatile food and energy costs, to fall down 0.3% for the month. Baweja said market expectations for a restrictive Federal Reserve would ease somewhat, which would help companies’ price-to-earnings ratios. Earlier this month, a lower-than-expected inflation print in October prompted a cautious rally in the market. Baweja pointed to the poor performance of the S&P 500 so far this year, down 15.5% relative to a 9.6% decline for Europe’s Stoxx 600. “It’s because it was a rating year, it was a year that your risk-free rate, your real interest rate, your real two-year rate, went up by 500 basis points. So it was a de-rating year.” Was,” he said. , But earnings will be the issue next year, Baweja said, especially given the headwinds of the slowdown. He expects returns in equities to be “fairly modest” next year, given competition from higher bond yields, but he sees US stocks outperforming European ones. “Life ain’t zero and another black and white, but if there’s going to be a lot of problems next year [earnings]”Europe is in more harm’s way than the US,” Baweja said. Cyclicals did great – content and energy. These are sectors that most people consider to be cyclical, these are sectors that have done extremely well and that’s why cyclicality remains at such a high level,” he said, citing financial stocks as well as solid balance sheets. But He emphasized that a number of factors will change as you move toward global growth closer to 2%, “which is as close to a recession as we can get.” “Next year I think it’s going to be a lot more defensive than cyclical.” So your classic utilities, technology Baweja said, potentially healthcare, these will probably do a lot better, and even some consumers will probably do a lot better than the productive side of the economy, which is the materials and industries. Is.