Estados Unidos

The Fed's recent dovishness represents an acknowledgement of the feedback loop between Fed policy and financial conditions. Expect Fed hawkishness to ramp back up prior to the next rate hike, likely in June.

The Fed's decision to scale back intended interest rate hikes reflects economic reality.

A dovish Fed bought the bounce a bit more time, but there is little incentive to add portfolio risk. Buy consumer finance, especially vs. banks, and expect communications equipment outperformance.

While the FOMC was more dovish than expected, rising inflation may cause the Fed to escalate hawkish rhetoric. The bounce in oil should help high-beta stocks. Underweight U.S. equities versus Europe, Japan and H-shares. We estimate U.S. equities will deliver returns of 4%, ann. over the next 10 years, <i>vis-à-vis</i>  9% for the euro area and Japan, and 14% for H-shares. Central banks have more options to combat any possible debt-deflation spiral in Europe/Japan/China than is often recognized.

The allure of gold equities has risen another notch following this week's dovish shift at the FOMC. After raising interest rates only a few months ago in the face of tight financial conditions, the Fed has backed down, acknowledging global headwinds. However, this flip flop also underscores the Fed's data dependency, which is fostering increased overall policy uncertainty. When combined with the unknown consequences and efficacy of negative deposit rates abroad, the allure of owning gold as a portfolio and currency hedge climbs. At a minimum, the inability of global growth to gain traction underscores that real interest rates, the opportunity cost of holding gold, are likely to stay extremely low, or negative, for a prolonged period. As a result, gold should stay well bid, despite the gains that have already accrued year-to-date. We reiterate our recent upgrade to overweight.

A surprisingly dovish outcome from this week's FOMC meeting has led to broad-based weakness in the U.S. dollar. The monetary policy divergence supporting the dollar may have peaked.

The outlook for the S&P consumer discretionary sector is bearish. The time to buy this early cyclical sector is when the Fed is embarking on an easing cycle, in a bid to improve the labor market conditions and restart the credit cycle. The opposite is now true, full employment has already been reached, and the Fed is poised to continue lifting interest rates this year. Historically, interest rates have been inversely correlated with relative performance and the current message is to avoid the U.S. consumer discretionary sector (top panel). Credit is a powerful fuel for consumer discretionary stocks. On this front, the recent continued tightening in U.S. lending standards is worrisome, especially given waning loan demand, according to the latest Fed's senior loan officer survey. The broad-based deterioration implies that tighter credit will persist, to the detriment of loan growth (second panel). Finally, relative consumer discretionary valuations in the U.S. are expensive. The bottom panel of the chart shows that the U.S. is trading at a 6% EV/EBTIDA premium to the global consumer discretionary sector. Bottom Line: A below benchmark allocation is warranted for the U.S. consumer discretionary sector, but opportunities exist outside the U.S., please see the next Insight.

We differ markedly with the U.S. EIA's assessment of the near-term evolution of oil supply and demand.

We recently boosted weightings in the S&P electrical equipment & components index, and the latest data reinforce this view. Final demand has stayed more resilient than other manufacturing and resource-intensive industries, as reflected in both new order and capital investment trends (second panel). Despite this top-line resilience, electrical equipment manufacturers have been among the most aggressive in protecting profit margins through cost cutting and capacity reduction. That is evident in rising utilization rates, a remarkable feat given that the manufacturing sector is flirting with recession, and improving productivity growth. The implication is that health returns on equity should persist, heralding a re-rating in very depressed relative earnings growth expectations, and valuations. The ticker symbols for the stocks in this index are: AME, ETN, EMR, ROK. Chart

The S&P rail index has bounced off its lows but continues to lack profit support to extend the recovery attempt. Total railcar shipments remain under pressure, which signals ongoing weak utilization rates and low odds of a reversal in selling price deflation. Coal markets are likely to stay under pressure as a consequence of high utility coal inventory levels, as electricity production was adversely impacted by an unseasonably warm North American winter. The latest retail sales report was also soft, and has sustained downward pressure on the retail sales-to-inventory ratio. That can be a decent leading indication for intermodal railcar shipments, the largest freight shipping category. Thus, despite attractive valuations and aggressive cost cutting efforts, we maintain a neutral weighting, preferring another industrials group to benefit from a slightly more reflationary tone in overall markets, please see the next Insight. The ticker symbols for the stocks in this index are: CSX, KSU, NSC, UNP.