Highlights Stay tactically overweight to equities for the time being. Close the overweight to industrial commodities versus equities. The financials, basic resources, and industrials equity sectors can continue to outperform for a…
Highlights Asset allocation: Go long industrial commodities versus equities on a 6-month horizon. If an inflationary impulse is dominating, beaten-down industrial commodities have more upside than richly valued equities; and if a…
Neutral The S&P chemicals index appears to have found a bottom over the past couple of months, arresting the slide that began at the end of 2016. There is good reason too; producer prices have sustained their momentum (…
Highlights Several economic and financial market indicators point to a budding downtrend in Chinese capital spending and its industrial sector. The recent underperformance of global mining, chemicals and machinery/industrials…
Neutral Prior to our midsummer upgrade to neutral, our key concern for the S&P chemicals index was that perennial overcapacity would put a ceiling on margin improvement. Since then surging global demand growth has driven producer…
Highlights Portfolio Strategy We reiterate our recent overweight calls in banks/financials and energy. Chemicals/materials and telecom services no longer deserve a below benchmark allocation. Pharma/health care and utilities are now…
In the summer of 2014 we went underweight the S&P chemicals index, anticipating an earnings underperformance phase, driven by weak revenues as chemicals manufacturers were furiously adding capacity to benefit from lower domestic…
Highlights Portfolio Strategy The chemicals bear market is over. Synchronized global growth, receding global capacity and improving domestic operating conditions compel us to lift exposure to neutral. As a result, our materials sector…
The relative performance of the chemicals index has been sideways for two years, despite significant moves in some historically strongly correlated indicators. The U.S. dollar, with which the index varies negatively, has softened…
Chemicals stocks have significantly underperformed the broad market since our underweight call in 2014, pulled lower by the soaring U.S. dollar and sagging industry productivity. Net earnings revisions have been consistently revised…