INCORPORATING QUANT SIGNALS INTO EU EQUITY SECTOR/STYLE STRATEGY: MAINTAIN A TILT TO CYCLICALS AND VALUE
- We present an update of our proprietary equity valuation tool, based on quant models. It provides indications of over- or undervaluation for different sectors and styles of European equities, which is further enriched by our qualitative analysis.
- Currently, among European equity sectors, financials, energy, telecoms, and autos look undervalued while Pharma, utilities and software appear overvalued.
- Among European equity styles, undervaluation is indicated for large cap value and small cap while growth, quality, and momentum look particularly expensive.
- That said, incorporating also non-quant signals coming from our qualitative analyses, we recommend having a tilt to cyclicals and value: Overweight insurance, diversified financials, capital goods, semiconductors, tech hardware and food. Underweight transportation, media and telecoms.