Forget inflation. Disinflation could be the big surprise of 2023, according to UBS. “After peaking higher and persisting longer than most expected, inflation is finally rolling over quickly. From there, we think the pace of disinflation will also be faster than markets expect,” he wrote in a note on Wednesday UBS strategist Nicolas Le Roux. Investors can prepare their portfolios for growing disinflationary forces on the horizon, according to the note. These include slack in supply chains, commodity prices and even some weakness in the labor market. On Wednesday, investors absorbed the latest data on the producer price index, which showed a 0.5% decline in December. Economists polled by the Dow Jones had forecast a 0.1% decline for the month. It’s the latest signal in economic data that inflation is easing from its highs, raising hopes that the Federal Reserve will soon end its rate-hiking campaign. For such an environment, UBS has selected global stocks that would be most positively affected by disinflation in the US, Europe, UK, Asia Pacific and Latin America. According to the note, these names were selected for their return sensitivity to changes in inflation, price performance during periods of declining inflation, and sensitivity of returns to changes in inflation indices. Here are 10 stocks that UBS has spotted. Netflix is positively correlated with disinflation, according to the note. Jefferies analyst Andrew Uerkwitz recently upgraded the streaming giant to buy from hold, saying in a recent note that Netflix will offer investors a safe haven in a downturn as it implements password-sharing changes. Another firm that will benefit from a temporary slowdown in price growth is Dollar General, which UBS says is positively correlated with disinflation. Logitech, a manufacturer of computer peripherals, will also benefit from disinflation. To be sure, the stock was downgraded to hold from buy this month at Deutsche Bank, which said a tough economic backdrop could hurt computer and video spending. Other stocks included in this list are Abbott Laboratories and Clorox. — CNBC’s Michael Bloom contributed to this report.
