Results for search of category: United Kingdom

Lessons from a Fast Market

Yesterday’s sell-off was so brutal that it probably marks the start of a different regime in equity markets. We are out of Phase 1 of the recovery and into a second more sceptical and nervous regime. Both the US and the UK broke of out the uptrends in our daily indicator that have been in place since March. The technical situation is better in the Eurozone and Japan, while the level of financial repression is China so severe, in our view, that the indicator has lost most of its signalling power.  [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... ]

The Meaning of Boris

The result of the UK election has made the country more attractive to international equity investors, but not to domestic investors, except in the sense that equities everywhere have become more attractive relative to fixed income. We do have substantial overweight positions in cyclical sectors like Industrials, but these are funded by underweights in other cyclical sectors like Materials. We expect to upgrade Small Caps to overweight in the near future, but we have already done so in Japan and the Eurozone. It’s all a bit underwhelming. But our models are clear that if you think that the UK will prosper outside the EU, you should buy Ireland.  [Read More... ]

Six Sector Ideas

Where to look in advance of the Q3 results season. The macro picture is confused. Our last note argued that we are in the late late-cycle for equities, but we could go on like this for months and there are no new developments to prove or disprove this view. So, our focus shifts to sector selection. We highlight six sector ideas – one from each region we cover – where we think there is potential for a major upgrade or downgrade in the near future.  [Read More... ]

Health Warning

The difference between our recommended sector weights for the UK and the Eurozone has reached a seven-year high. Of course, Brexit is part of the explanation, but for most of the period since the referendum this divergence was below its long-term average. It has always been dangerous to transfer sector views from one region to another without careful thought, but the danger now is much higher than normal.  [Read More... ]

Bouncing Britannia

Our models suggest that the UK is recovering relative to global equities. They also suggest that major international investors who were worried about Brexit have long since reduced their exposure to the bare minimum. Predicting the shape of the final deal is still very difficult, but if there are no more sellers….  [Read More... ]

Whistle-Stop Tour

We finally have the bounce in risk assets that we expected in the run-up to Christmas, but it is not yet strong enough to break any of the downtrends that developed earlier in Q4. We are at maximum underweight in all our equity vs bond models and similar levels of risk aversion apply in our fixed income and equity sector models. The only exception is that we have an overweight on Emerging Markets in our global equity model and may be about to downgrade the US to underweight.  [Read More... ]

Straws in the Wind

Forecasting with precision all the components of a bear market is very difficult. Observing the increasing number of signals which point in that direction is much easier. These range from US high yield to Eurozone government bonds and US and European equity strategy. It’s not all bad news. There are some positives, such as the potential for a surprise in UK Equities, and a message to buy duration in US Treasuries. However, the overall message from these straws in the wind is very powerful.  [Read More... ]


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