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08 Jul 2020
Cyclicality over Value
Kering SA (KER:WBO), 0 | Societe Generale S.A. Class A (GLE:WBO), 0 | BP p.l.c. (BP:LON), 515 | J Sainsbury plc (SBRY:LON), 259 | Carrefour SA (CARR:WBO), 0 | Pernod Ricard SA (RI:WBO), 0 | IMI plc (IMI:LON), 1,726 | London Stock Exchange Group plc (LSEG:LON), 8,974 | Deutsche Post AG (DHL:WBO), 0 | Travis Perkins plc (TPK:LON), 712 | Credit Agricole SA (ACA:WBO), 0 | Grifols, S.A. Class A (GRF:WBO), 0 | Shaftesbury Capital PLC (SHC:LON), 133 | Covestro AG (1COV:WBO), 0 | Ibstock Plc (IBST:LON), 147 | Quilter Plc (QLT:LON), 98.8 | Julius Baer Gruppe AG (BAER:SWX), 0
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Cyclicality over Value
Kering SA (KER:WBO), 0 | Societe Generale S.A. Class A (GLE:WBO), 0 | BP p.l.c. (BP:LON), 515 | J Sainsbury plc (SBRY:LON), 259 | Carrefour SA (CARR:WBO), 0 | Pernod Ricard SA (RI:WBO), 0 | IMI plc (IMI:LON), 1,726 | London Stock Exchange Group plc (LSEG:LON), 8,974 | Deutsche Post AG (DHL:WBO), 0 | Travis Perkins plc (TPK:LON), 712 | Credit Agricole SA (ACA:WBO), 0 | Grifols, S.A. Class A (GRF:WBO), 0 | Shaftesbury Capital PLC (SHC:LON), 133 | Covestro AG (1COV:WBO), 0 | Ibstock Plc (IBST:LON), 147 | Quilter Plc (QLT:LON), 98.8 | Julius Baer Gruppe AG (BAER:SWX), 0
- Published:
08 Jul 2020 -
Author:
Hannah Avory -
Pages:
10
Sharp rebound, new risks
The data released in June confirms a sharper-than-expected rebound in activity following the ''Great Lockdown''. New risks are, however, emerging and are becoming visible in the high frequency data in the US. The rise in Covid cases in the US and large EM countries may slow the recovery in the coming months. In July, we will watch for possible announcements in the US, the UK and France, and progress on the EU Recovery Fund. Looking further ahead, if more social distancing is required, economic data could start to disappoint in the US this autumn. Our risk appetite indicator, the OGRI, remained in negative territory in June despite the recent rally in risk assets.
Cyclicality over Value
STOXX 600 has risen 5.3% since end-May and outperformed US equities. Over the period, the Value factor outperformed Growth and Quality by respectively 93 and 215 bps. More strikingly, Cyclicals have outperformed defensives by 5.1%. The key drivers of this cyclical rebound - policy and sequential improvement in macro data - remain strong but we can see real tactical challenges emerging as the market eyes towards a complicated H2. In this setup, a preference for the most resilient businesses should be more pronounced. In spite of a continued rebound, this preference could limit the prospect of a large value rally in the near term. In term of portfolio implications, we aim to mitigate some of the build-up in volatility that could emerge.
Our Key Ideas leads the way
Our flagship list, Key Ideas, had a strong performance in June, beating the benchmark by more than 2%, for a third straight month of good performance. The Emerging Consumer list also had a strong month. We do not make changes to either list this month. However as we monitor risk appetite, we bring more exposure to Quality within our lists. In particular, we replace Societe Generale with Credit Agricole in our Deep value list and opt for LSE and Travis Perkins instead of...