Equity Strategy: Feb Chartbook - Reiterate that long duration trade is to consolidate; USD could be bottoming out; Stay long Growth vs Value, US over Eurozone, OW Japan, cautious on China

Speaker: Mislav Matejka, CFA

So far this year, US is ahead of International, Growth is outperforming Value, large caps are again beating small - Russell2000 is outright down on the year 3%, and China continued struggling. We believe that this, ultimately unhealthy, high concentration and narrow leadership is set to continue until something breaks. To buy Value, beta and International stocks, one needs to see a reflationary backdrop, in our view, but we could have the exact opposite. The risk is of a disappointment on both sides of the Goldilocks narrative. Fed cuts might still be overdiscounted, despite the recent hawkish repricing, and the chances are that inflation picks up again, supply side driven, rather than due to stronger activity, freight rates have nearly tripled. We believe our long duration call made in October will have legs in 2024, but have argued at the start of this year that yields will likely consolidate near term, and the USD could be bottoming out. Regionally, we have preferred US to International stocks since May of last year, and don’t see that changing yet. We remain cautious on China, keep fading the bounces, and keep OW Japan – it remains our top regional pick. We are OW Growth vs Value, continuing our call from 2023, and reiterate our downgrade of Banks to UW in Q4 of last year, after three years of Banks beating the market.

This podcast was recorded on 04 February 2024.

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