All into Account Equity Strategy - September Chartbook: For how long will “bad” be interpreted as “good”? Stay OW Growth vs Value, keep fading Cyclicals, such as Autos and Industrials
Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy
Divergences keep opening up between the resilient equity markets and softening dataflow. Manufacturing PMI recovery, that was the consensus call for months now, remains elusive, and there are signs of services weakening, as well. There is no regional convergence coming through, with Europe disappointing further, and China staying mixed. SX5E had gone nowhere for half a year now, and has lagged the US since May, coincident with our downgrade to UW, but the relative performance of SX5E vs bonds has opened up a big gap with IFO, worth 20%+. How will it close? Also, even as Cyclicals finally stalled somewhat in August, the gap with PMIs remains significant. In a sense, bad is so far still seen as good, but this could change if labour market and consumer dataflow starts disappointing. Bond yields look set to move lower in that scenario, which will keep supporting our OW Growth vs Value call that we had on this year, at least in relative terms, but the bond proxy sectors should be logically getting a bid, too. Cyclicals stalled in August, keep fading them, in particular Industrials and Autos.
This podcast was recorded on 03 September 2023.
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