Eurozone – Page 2 – Harlyn Research LLP

How the World Turns

Friday, November 27th, 2020

The value trade won’t work everywhere

This report is a real-time survey of how the great rotation is progressing in different regions of the world. Our conclusions are (1) Many of the important sector infection points happened back in September; so talking about them now in terms of factors suggests that people missed them the first time round. (2) The UK has much the most aggressive sector rotation and China the least. (3) There are different winners and losers in each region and any attempt to apply one paradigm to all of them is likely to fail. (4) Many value-rich sectors in each region have hardly moved, suggesting that the value trade has already been differentiated into those sectors which have catalysts and those which don’t.

Filed under: Categories: China, Equities, Eurozone, Japan, Rotation, United Kingdom, United States

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Rotation, Inflection & Persistence

Friday, November 13th, 2020

The bottom is not bouncing to the top

There has been a lot of excitement about factor rotation in equities, but it’s mostly based on the back of two days’ trading at the start of this week. We agree that rotation is going to pick up, but from a very low base and our work suggests that it’s going to be from the top to the middle and vice versa. We think that the laggards, like Financials, Energy and Telecom could underperform for some time to come. If the factors in question are meaningful, they will show up in sector performance fairly soon. If not, perhaps they are not as important as reported.

Filed under: Categories: Eurozone, Investment Styles, Sector Strategy, Technology, United States

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Dropping Bunds as the Benchmark

Friday, October 2nd, 2020

Europe is on the way to debt-mutuality

It’s time to restructure our euro-denominated fixed income portfolio. The yield on 7-10 year German bunds is too negative for comfort and they no longer offer the best way of creating risk-efficient portfolios. A pan-euro index of government bonds with the same maturity has done this more effectively for the last two years and we believe it offers a safer and more liquid benchmark asset.

Filed under: Categories: Eurozone, Government Bonds, Harlyn's Process

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Signs of Life in the Eurozone

Friday, July 24th, 2020

Rally in Financials is thematically important for the region

Our charts for Eurozone equities relative to the rest of the world have suddenly gone vertical. The change started in late June and the charts have improved in each of the last four weeks. It is now supported by improving lead indicators in cyclical sectors, like Materials and Industrials, and deep value sectors like Financials. The latter are key to the rehabilitation theme. Without them, a Eurozone rally will be anaemic; with them it could be surprisingly powerful.

Filed under: Categories: Equities, Eurozone, Market Timing, Sector Strategy

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Lessons from a Fast Market

Friday, June 12th, 2020

China plays a different game and Healthcare suffers

Yesterday’s sell-off was so brutal that it probably marks the start of a different regime in equity markets. We are out of Phase 1 of the recovery and into a second more sceptical and nervous regime. Both the US and the UK broke of out the uptrends in our daily indicator that have been in place since March. The technical situation is better in the Eurozone and Japan, while the level of financial repression is China so severe, in our view, that the indicator has lost most of its signalling power.

Filed under: Categories: China, Eurozone, Government Bonds, Harlyn's Process, Japan, United Kingdom, United States, Volatility

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Six Sector Ideas

Thursday, September 26th, 2019

Where to look in advance of the Q3 results season

The macro picture is confused. Our last note argued that we are in the late late-cycle for equities, but we could go on like this for months and there are no new developments to prove or disprove this view. So, our focus shifts to sector selection. We highlight six sector ideas – one from each region we cover – where we think there is potential for a major upgrade or downgrade in the near future.

Filed under: Categories: China, Equities, Eurozone, Japan, Sector Strategy, United Kingdom, United States

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Eurozone Rising

Thursday, July 11th, 2019

US investors need to take another look

The Eurozone will soon be the top-ranked equity region in both our euro and dollar-denominated asset allocation models. We think this will prompt US investors to have another look across the Atlantic. We think there are three sectors where they will concentrate their buying to start with: Consumer Goods; Industrials and Utilities. All three sectors are capable of outperforming their US counterpart and the US index as a whole.

Filed under: Categories: Equities, Eurozone, Global Equities, Sector Strategy

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Health Warning

Thursday, February 7th, 2019

Running European equity portfolios is harder than normal

The difference between our recommended sector weights for the UK and the Eurozone has reached a seven-year high. Of course, Brexit is part of the explanation, but for most of the period since the referendum this divergence was below its long-term average. It has always been dangerous to transfer sector views from one region to another without careful thought, but the danger now is much higher than normal.

Filed under: Categories: Equities, Eurozone, Sector Strategy, United Kingdom

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Straws in the Wind

Wednesday, November 21st, 2018

A time for observation not forecasts

Forecasting with precision all the components of a bear market is very difficult. Observing the increasing number of signals which point in that direction is much easier. These range from US high yield to Eurozone government bonds and US and European equity strategy. It’s not all bad news. There are some positives, such as the potential for a surprise in UK Equities, and a message to buy duration in US Treasuries. However, the overall message from these straws in the wind is very powerful.

Filed under: Categories: Corporate Bonds, Equities, Eurozone, Government Bonds, United Kingdom

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Midsummer Moderation

Wednesday, August 22nd, 2018

Time to reduce the beta of your equity portfolio

All four defensive sectors in the US have generated relative buy signals in the last three months and as a group they are starting to outperform the index. This may or may not be an indicator for the equity market as a whole; that is for the future to decide. Right now, investors should be reducing the beta of their equity portfolio, no matter what their macro-outlook. And the same applies to European portfolios as well

Filed under: Categories: Defensives, Eurozone, Sector Strategy, United States

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