UPDATE ON QUANT SIGNALS FOR EU EQUITY SECTORS AND STYLES

For banks, low yields and uncertainty on the economic recovery remain key driver of underperformance. Furthermore, historically, a structural increase in ECB’s assets is not a particularly welcome outcome for banks.

Highlights:

  • We present an update of our proprietary equity valuation tool, based on quant models, which provides indications of over- or undervaluation for different sectors and styles of European equities.
  • Currently, among the European equity sectors, financials, industrials, telecommunications, energy, staples and automobiles look undervalued while materials and IT appear overvalued.
  • Among the European equity styles, undervaluation is indicated for large cap value while growth, momentum, large cap and low leverage look expensive.
  • That said, incorporating non-quant signals from our analyses, we still recommend adopting a portfolio tilted to quality and defensives, especially at a time when markets show valuations which are not in the comfortable zone anymore.
  • We are slightly OW on defensives vs cyclicals. OW large cap, slight OW momentum plus growth and Quality vs Value. Sector OW: pharma, IT, utilities, telecoms and staples. Neutral: financials and energy. UW: real estate, discretionary, transportation and automobiles.

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UPDATE ON QUANT SIGNALS FOR EU EQUITY SECTORS AND STYLES

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