The bullish stances on Personal & Household Goods, Travel & Leisure and Media
are maintained from last month, as are the bearish signals in Banks and late-cycle
sectors. Average beta of ‘Bullish’ signals equals one; it had previously been <1
since Nov ’13. In contrast, ‘Bearish’ sectors remain cyclically biased – this will
continue until our Style Cycle signals ‘Recovery’ in Europe. Extremely low bond
yields and weak commodity prices keep any macro risk-appetite in check.
* Best monthly performance since inception
January was the strongest month for our Sector Signals model since inception in
June ’13. ‘Bullish’ sectors outperformed ‘Bearish’ sectors by 3.7% last month (see
Table 3). We attribute this to the importance of momentum factors in our sectorpicking
framework.
* Following the momentum
Longs are maintained in consumer sectors with strong price momentum: Personal &
Household Goods, Travel & Leisure and Media. Our core theme of avoiding Banks
and late-cycle cyclicals (Industrials and Construction) will remain in the absence of
persistent macro improvement. Poor earnings revisions, poor price momentum and
cyclical characteristics keep Oil & Gas at the bottom, despite lack of fund manager
positioning in the sector.