Equities

US tariffs will not derail the low-inflation economic recovery underway in the Euro Area. Investors should overweight European equities, focusing on parts of the market more insulated from tariffs.

This week we develop two ideas with three screeners. The first identifies deep cyclical sectors that continue to outperform post Liberation Day in the US. We provide two screens to identify equity opportunities for this.  Our final screener identifies momentum stocks that are cheap and trending and will benefit from a soft landing.   

Expectations for US inflation at 3.3 percent are inconsistent with expectations for the Fed to slash rates, so one of these expectations is likely wrong. We describe how to play this mispricing. Plus, a new position is to go overweight global consumer discretionary (RXI).

Chinese stock prices have significantly decoupled from the country’s business cycle, with the full impact of US tariffs yet to be realized. The valuation-driven equity gains without a cyclical economic recovery will be vulnerable to a reversal.