Shifting to neutral on equities
Our intermediate-term (3-6 month) indicators have deteriorated enough recently to argue for shifting from overweight equities in our asset allocation framework to neutral. While stocks are still favored over bonds on a longer-term relative valuation basis, the prospect for further consolidation and volatility means that easing back equity exposure and holding somewhat more cash makes sense in our view.
Tech Sector In The Driver’s Seat For US Relative Performance
In this post, we highlight the interaction of US outperformance versus the rest of the world this year and US Technology relative to Ex-US Technology.
First, the relative performance of the US equity market versus the rest of the world has been highly correlated with the relative performance of US Technology stocks relative to Ex-US Technology stocks.
Second, the outperformance of US Technology, and by extension the major US indices versus their non-US counterparts, looks likely to continue based on relative earnings estimate revisions patterns.