* Stay countercyclical as de-risking will carry-on
We started the year with a preference for lower-beta sectors and our sector tactical signals for Feb-14 continue to favour defensives over cyclicals. The aggregate beta of the top-5 sectors remains virtually unchanged at 0.88.
--> Bullish Tactical Signals: Travel, Construction, Healthcare, Telecoms, Chemicals
--> Bearish Tactical Signals: Technology, Autos, Energy, Industrials and Insurance
* The clearest opportunities are in Pharma…
Travel, Pharma and Telecoms maintain a bullish tactical signal from last month – of these we have a strategic OW on Pharma. The tactical signal improved for Construction and Chemicals on earnings revisions and positioning respectively. Chems is no longer the bottom of all sectors on EPS revisions and with positioning very negative may be a play for contrarians. Nevertheless, we consider the sector an UW in our strategic framework so expect any strength to be short-lived.
* …while Autos and Cap goods could come under pressure
Tech and Autos remain in the bearish territory from last month, and poor EPS revisions continue to weigh on industrials. Insurance and Energy moved into bearish territory in Feb predominantly due to weak price momentum.