Hunting for discounts in the January sales

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Strategic Sector Selector

US and European equity markets finished last year battered and bruised. Concerns about a potential global economic slowdown seemed to be the main driver, but we think the reaction is overdone. Our economic outlook is broadly unchanged from the previous quarter, and we think growth will be enough to support risk assets. We reduce our exposure to defensives in the US by downgrading food & beverage to Neutral, and close our Underweights in chemicals and construction & materials (both upgraded to Neutral). We become slightly more defensive by upgrading food & beverage to Overweight in Europe, expecting a period of adjustment as the ECB continues to reduce stimulus. However, we still favour consumer discretionary and financials in Europe, and travel & leisure and real estate in the US