Speaker: Mislav Matejka, CFA - Head of Global Equity Strategy

So far ytd, US and Japan are ahead of other markets, Growth is outperforming Value and large caps are again beating small in all key regions. We continue to believe that this, ultimately unhealthy, high concentration and narrow leadership is set to stay for a while longer. To buy Value and International stocks one needs to see a reflationary backdrop, in our view, but we could have the opposite. In terms of bond yields, we argued last October to go long duration, but also in January to look for a tactical bounce back in bond yields, as Fed easing became overdiscounted in markets. We now think that the counter-rally in yields might be running out of steam, and would advocate to go long duration again. The move back higher in Fed futures might be getting done – they roundtripped back to October levels, and activity momentum could soften from here. The question is, why didn’t equities weaken as US 10-year yields backed up 50bp during Jan-Feb? We think that this is because investors assumed that the yield upmove is reflective of economic acceleration, but we note that earnings projections for 2024 are not reacting positively – they keep coming down in most sectors. If the growth acceleration does not come through, this could act as a headwind. Overall, we keep OW Growth vs Value, US vs Europe, and still see Japan as top regional pick – we look for these to continue tracking.

This podcast was recorded on 04 March 2024.

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