Results for search of category: Rotation

How the World Turns

This report is a real-time survey of how the great rotation is progressing in different regions of the world. Our conclusions are (1) Many of the important sector infection points happened back in September; so talking about them now in terms of factors suggests that people missed them the first time round. (2) The UK has much the most aggressive sector rotation and China the least. (3) There are different winners and losers in each region and any attempt to apply one paradigm to all of them is likely to fail. (4) Many value-rich sectors in each region have hardly moved, suggesting that the value trade has already been differentiated into those sectors which have catalysts and those which don’t.  [Read More... ]

Rotation in the US

Our US equity sector model has been unusually quiet of late, but we are picking up signals that this is about to change. The lead indicator for the scale of potential changes is close to a one-year high and the level of conviction attached to this reading is at a two-year high. We expect the rotation to start at the bottom and work upwards. Energy and Materials look interesting, while Staples, Utilities and, possibly, Healthcare look challenged.  [Read More... ]

In Search of Fresh Inspiration

In Q3 2019 a group of housebuilders, utilities and dollar-sensitive industrials began to outperform the UK index on hopes that the Conservatives would win a general election. This created a powerful long momentum effect, but our analysis says that we are now close to maximum exposure. For the Boris trade to become more powerful, we need greater consensus on which stocks to underweight/short.  [Read More... ]

Where Have All the Leaders Gone?

Two weeks ago, we had the lowest number of net buying opportunities for individual countries since May 2000. It’s hard to be bullish about global equities as an asset class when there are so few leaders. Japan is one of just three countries which look attractive on our system, but nobody seems to care.  [Read More... ]

Hyper-stability is destabilizing

This week has seen a sudden upsurge in factor rotation at the individual stock level in the US. It may be too soon to call this a quant crash and we would be wary of attributing this to some macro-economic story, like a change in Treasury yields. The best explanation may be that it was so darn quiet immediately beforehand – something which our equity sector models show very clearly.  [Read More... ]

Lagging sectors and regions

What does an underweight in both really mean? This week we look at which equity sectors have historically been rated underweight when their region is also rated underweight. Causation is much harder to establish than for overweight sectors in overweight regions. The main lesson is that sector selection may not compensate for being in the wrong region in a bull market or the wrong asset class in a bear market.  [Read More... ]

Selectively Europe

By the time equities regain traction relative to fixed income, we believe Europe will provide the leaders. The main reasons are abnormally low volatility compared with the US and global equities and the ongoing stabilisation of the trade-weighted dollar index. Our preferred countries are the UK, France and the Netherlands. It is too early for Germany and Spain, and maybe too late for Italy. Avoid Switzerland, Sweden and Austria.  [Read More... ]

Because You’re Worth It

Capital deserves the chance of an upside. Risk conditions continue to deteriorate and a number of signs suggest that we are entering a general rotation out of risk assets. These include the ranking of the Technology in all our equity sector models, the rating of US Treasuries vs other fixed income assets, and a loss of momentum in EM Equities. Your capital is not trapped and should only be invested where and when there is a good chance of a positive return.  [Read More... ]


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