Friday, May 19th, 2023
Only high-conviction idea should be actioned
These are confusing times in financial markets, with little direction in any of the main asset classes. This week, we focus only on the high-conviction ideas generated by our models covering asset allocation, commodities, equity sectors, individual countries, credit and different maturities in government bonds. In general, there are more negative, than positive, high-conviction ideas. These include topping signals in many Eurozone countries such as France, Italy, Germany and Spain and for the Eurozone as a whole. We have high-conviction negative signals in Financials across all regions, apart from China, and other pre-recession signals in sectors like US Industrials and UK Materials. The positive signal in asset allocation is for US equities, but the level of conviction is lower than the negative call on the Eurozone, and is heavily dependent on the positive view of US Communications going forward. We like Europe, ex Eurozone, particularly Switzerland and Denmark, and detect signs that India may be bottoming, though the rest of EM Equities are highly unattractive.