Materials
The S&P materials sector has been unable to hold its ground, despite the softening U.S. dollar and boost to global manufacturing output this year. Instead, the sector has taken its cue from commodity prices, and leading indicators thereof, such as the ratio of Latin American to Emerging…
GAA DM Equity Country Allocation Model Update The model has increased its allocation to Netherland, Italy, France and Germany, the underweight in Australia is also reduced by half. All these are financed by a large reduction in the U.S. overweight, mostly due to the change in liquidity and…
Highlights Portfolio Strategy Upgrade packaged food stocks to overweight. Enough value creation has occurred to create an attractive entry point in this consumer goods sub-index. Our tactical overweight in the S&P utilities sector is beginning to bear fruit. Get ready to book profits.…
Highlights Global manufacturing inventories are low but this does not guarantee higher share prices for global cyclical stocks. If an increase in inventories is accompanied by strengthening final demand, it will be very bullish for the global business cycle. If final demand growth falters,…
Highlights Key Portfolio Highlights Improved world economic growth and rising inflation expectations have buoyed global equities (Chart 1). The downside is that financial conditions are tightening and U.S. dollar-based liquidity is contracting, which is growth restrictive (Chart 2). The…
Highlights Portfolio Strategy Food price deflation bodes well for increased volumes, and by extension, packaging stocks. Upgrade to overweight. Prospects for intensifying market and economic volatility argue for reestablishing a portfolio hedge in gold shares. The tech sector underperforms…
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 lower over the past few years, and are unlikely to recover…
Highlights Portfolio Strategy Media stocks are poised to challenge previous relative performance highs as sales growth reaccelerates. Stay overweight. The materials sector has lagged behind the commodity price rally, a sign of underlying weakness rather than latent strength. Chemicals…
Highlights China's supply-side structural reforms will focus mainly on its coal and steel markets this year. In addition, environmental policies will become stricter in 2017, as Beijing puts more weight on environmental protection than economic development. As as result, supply growth will slow,…
The S&P materials sector is rolling over relative to the broad market after a brief bout of strength. Downside risks remain acute. The strong U.S. dollar will exact a toll on U.S. exporters, particularly if emerging markets and China do not experience an acceleration in final demand. While…