Equity sector models and strategy: still OW on Value but turning more constructive on staples
- We provide an assessment of European sectors and styles judging from the signals produced by our quant models, further enriched by our qualitative analysis.
- The bulk of the overweight is maintained in Value sectors, financials and energy, to leverage on economic recovery, higher 10-year yields and CPI.
- We increased even further the exposure to households – bottoming earnings revisions and peaking confidence indicators – financing it with a higher underweight in Media (poor revisions and quant models).
- Regarding specific sectors, we overweight banks, div. financials, energy, materials, household & personal products, software and tech hardware and underweight cons. services, media, real estate, utilities and telecoms.
- Our quantitative analysis coming from Machine Learning (ML) and classic approaches shows undervaluation for energy, auto and software and overvaluation for comm. & prof. services, pharma, telecoms, media, materials, food, cons. services and retailing.
- Among European styles, undervaluation is indicated for defensives, momentum, small cap and min. volatility. Expensive are low leverage, large cap and cyclicals.