HALISTER1: Sharp Rally Into European Cyclicals Won’t Persist, Goldman Says

Sharp Rally Into European Cyclicals Won’t Persist, Goldman Says

(Bloomberg) -- Moderate economic growth and low bond yields mean equities are attractive versus other assets but are unlikely to provide bull-market style returns from here, Goldman Sachs strategists including Sharon Bell write in note.
  • Rotation into cyclicals will not persist: economic data in U.S. has softened and data in Europe remains positive but weak
  • In low-return environment, investors will still seek growth and defensive yield; however, dominance of pure ‘bond proxy’ staples sectors is vulnerable given that no further downside in bond yields seen
  • Upgrades construction and materials, utilities, digital economy, business services to overweight; upgrades industrial goods and services to neutral; downgrades food & beverage to neutral; downgrades food retail to underweight
  • Remains underweight basic resources, chemicals, retail; remains neutral banks
  • Estimates slight setback over 3 months, flat returns on 6 months, positive over 12 months, with Stoxx 600 targets of 335, 350 and 360 respectively
  • Sectors have become the most important drivers of dispersion
RELATED
  • Earlier: Equities Vulnerable, Too Much Complacency Has Crept In, JPM Says
  • Earlier: Glimmers of Support Emerging for European Banking Sector: BNP
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Sharon Bell (Goldman Sachs Group Inc/The)

To de-activate this alert, click here

UUID: 7947283