All posts in category: Rotation (17)

Hyper-stability is destabilizing

Thursday, September 12th, 2019

Are we in a quant crash and what does it mean?

This week has seen a sudden upsurge in factor rotation at the individual stock level in the US. It may be too soon to call this a quant crash and we would be wary of attributing this to some macro-economic story, like a change in Treasury yields. The best explanation may be that it was so darn quiet immediately beforehand – something which our equity sector models show very clearly.

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Time for Another Look

Wednesday, October 3rd, 2018

Two bullish signals for Japan

We have two clear signals that investors – both international and domestic – should take another look at Japanese equities. Our argument is that Japan has better momentum and less risk than other regions, apart from the US where we are maxed out.

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Lagging sectors and regions

Wednesday, May 30th, 2018

What does an underweight in both really mean?

This week we look at which equity sectors have historically been rated underweight when their region is also rated underweight. Causation is much harder to establish than for overweight sectors in overweight regions. The main lesson is that sector selection may not compensate for being in the wrong region in a bull market or the wrong asset class in a bear market.

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Leadership Potential

Wednesday, May 23rd, 2018

Which sectors thrive when the region is overweight

We can use our sector and regional equity models to work out which sectors tend to lead a region higher, and which tend to conflict with an overweight recommendation. Sectors with the best leadership record (across all developed markets from 1996 onwards) are Financials and Industrials, but surprisingly not Technology. Sectors most in conflict tend to come from the defensives and Energy.

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Because You’re Worth It

Wednesday, April 11th, 2018

Capital deserves the chance of an upside

Risk conditions continue to deteriorate and a number of signs suggest that we are entering a general rotation out of risk assets. These include the ranking of the Technology in all our equity sector models, the rating of US Treasuries vs other fixed income assets, and a loss of momentum in EM Equities. Your capital is not trapped and should only be invested where and when there is a good chance of a positive return.

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Financial Rotation

Wednesday, July 12th, 2017

No evidence of co-ordinated global tightening

The new big idea is that Financials are responding to the prospect of a co-ordinated tightening of monetary policy which will steepen yield curves round the world. At a sector level, there is some superficial evidence to support this, but when we look are individual stocks, particularly in Europe, we see that there are other and better explanations.

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Messy and Inconsistent

Wednesday, March 22nd, 2017

High equity exposure vs rotation into defensives

The rotation into US defensives has broadened over the last two weeks. There is a potential contradiction with the high exposure to equities recommended by our asset allocation model. We look at the maths underlying our asset allocation decision, historical precedents for US equities being overbought and international equity comparisons. A 5-10% correction followed by renewed strength, just about fits all the evidence.

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