#1 Tech outperformance extreme despite slowing EPS;
#2 EU relative earnings revisions have troughed;
#3 Defensives' relative Shiller PE at 30Y low;
#4 UK Telecoms very unloved; #5 EU buyback growth positive again.
#1 Tech outperformance extreme despite slowing EPS trends.
The outperformance of Tech looks increasingly stretched with 80% of global sector constituents outperforming over the last month (highest since 2003). Further, this latest surge has not been accompanied by superior EPS trends.
#2 Worst of Europe's EPS underperformance now behind us.
Europe's priceunderperformance since last summer has closely tracked its weaker earnings trajectory. Now we are past the point of peak US upgrades, Europe's relative EPS profile should start to improve.
#3 Defensives' relative Shiller PE at 30Y low.
The relative Shiller PE for European defensives is at its lowest level in 30Y. In fact, the cheapest five sectors in Europe on this metric are all defensives, namely Telecoms, Utilities, Food Retail, Pharmaceuticals and Household Products.
#4 UK Telecoms - unloved .
If Telecoms are the most unloved sector in the market and the UK is the most unloved country, then UK Telecoms must be really unloved. This sector trades at a 20Y relative valuation low, yet is seeing a rising relative EPS trend.
#5 Upturn in European buybacks and the relevant stocks are outperforming.
Buyback activity in Europe is finally coming back to life with YoY growth now back into positive territory. Unlike in the US, companies in Europe that are doing buybacks are outperforming the market.