Results for search of category: Defensives

There Will Be A Correction

With very few exceptions, our main risk-appetite indicators are at or close to maximum risk-on. We see evidence of peaking behaviour in global equities vs global fixed income, in US Credit, and cyclicals vs defensives in the US, Japan and the UK. There is one indicator – Italian vs German government bonds - which is already past its peak. Most investors understand this and intend to use any correction as a buying opportunity. However, it still makes sense to take some risk off the table now, if only to put it back on at a lower price. We are also concerned that investors may be ignoring an uptick in geo-political risk.  [Read More... ]


Equity investors have decided to revisit a strategy first utilised during the secular stagnation debate of 2015 and early 2016. In the US and Europe, they are buying low beta defensives in case there is a recession and paying a premium for stocks with strong secular growth, in case there isn’t. There is very little active weight in the rest of their portfolios. It’s a Barbell strategy, which works while we wait for clarity from the US results season.  [Read More... ]

Markets at a Crossroads

We detect signs that the rally in global equities is losing momentum, but we could be wrong, so we are going to do nothing for the next week or two. There are signs of recovering risk appetite in EM Equities and in credit, but not in equity sector selection. Our global equity vs fixed income model is at a critical chart-point and we will look to US Industrials to provide confirmation of that message, whatever it is, whenever it comes.  [Read More... ]

Lost in Translation

There is a fundamental conflict between the bearish sector stance of our Chinese equity sector model and the bullish positioning of the US model. We don’t think it is possible for these two sets of sector recommendations to remain unchanged without having an impact on each other or the rest of the global equity universe. On balance we think it is more likely that the US will come to resemble China, rather than the other way around.  [Read More... ]

Midsummer Moderation

All four defensive sectors in the US have generated relative buy signals in the last three months and as a group they are starting to outperform the index. This may or may not be an indicator for the equity market as a whole; that is for the future to decide. Right now, investors should be reducing the beta of their equity portfolio, no matter what their macro-outlook. And the same applies to European portfolios as well.  [Read More... ]

Three Unrelated Ideas

Our models suggest that investors have decided to use Japanese rather than Eurozone Equities, as a way of funding their increased exposure to US Equities. US High Yield may be about to lose its #1 position in fixed income. Healthcare is about to be upgraded to overweight in the US and Europe. It is largely unaffected by the threat of a trade-war.  [Read More... ]

Defensive Mindset

The shift towards defensive equity sectors has clearly accelerated in the last three weeks. It has happened in every region and is led by the Utilities sector. The detail is less important than the big picture. Investors are worried about rising rates, rising oil prices and rising tariffs. They are buying defensives because of what they are not, rather than what they are.  [Read More... ]

One of Us Is Wrong

Defensive underweight contradicts top-down view. Our models show a clear contradiction between the neutral recommendation for European equities vs fixed income and the all-time record underweight in defensives, which we discussed two weeks ago. There is normally a good correlation between a bearish view on equities and defensives, but over the last year this has turned negative in Europe. The US and Japan do not share this problem. It’s one that Europe needs to resolve.  [Read More... ]

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