October is the cruellest month
The change in the investment environment has begun to affect US equity substantially. The defensive bias has emerged on Wall Street. The locus of risk in developed equity is shifting from the value style to growth and from
large caps to small.
We maintain the view that dangerous October will be followed by a yearend rally through November and December. The equity bull market in America is not dead yet.
We remove our sizable UW in Europe’s unloved Banks and reduce the scale of our super-OW position in the twin defensives of Healthcare and Consumer Staples. Our move is a form of profit-taking. For what remains of this year we do not think we need to be quite so defensive.