05.12.2022
Watching the defensives
The macro perspective on three defensive plays for equity investors:
Consumer Staples versus Consumer Discretionary
The chart shows macro fair value for the XLP / XLY ratio using our Short (blue) & Long (red) Term models.
Overall macro conditions supported Staples outperforming throughout the first half of 2022 but that trend peaked early summer, retraced over July / August and has been moving sideways since then.
Until recently.
In November macro conditions shifted and the trend for Staples to outperform re-established itself.
Consumer Staples versus Consumer Discretionary
The chart shows macro fair value for the XLP / XLY ratio using our Short (blue) & Long (red) Term models.
Overall macro conditions supported Staples outperforming throughout the first half of 2022 but that trend peaked early summer, retraced over July / August and has been moving sideways since then.
Until recently.
In November macro conditions shifted and the trend for Staples to outperform re-established itself.
Utilities versus S&P500
It's a similar pattern with Utilities outperforming the broader US equity market from January to June. There followed a retracement and a period of sideways price action.
Qi's Short Term model has just moved into a new regime - model confidence has risen from 27% at the start of October to 83% now.
Watching the blue line will be interesting. There are tentative signs it is basing. It could break either way but any upturn would suggest the broad macro environment is once again pointing to Utilities outperforming and a defensive allocation.
It's a similar pattern with Utilities outperforming the broader US equity market from January to June. There followed a retracement and a period of sideways price action.
Qi's Short Term model has just moved into a new regime - model confidence has risen from 27% at the start of October to 83% now.
Watching the blue line will be interesting. There are tentative signs it is basing. It could break either way but any upturn would suggest the broad macro environment is once again pointing to Utilities outperforming and a defensive allocation.
Infrastructure
PAVE is an ETF of US single stocks that benefit from US infrastructure projects. It is all about macro. Short term model confidence is 95%; Long Term model confidence is 89%.
And what does the macro picture currently say? There is a strong uptrend in macro-warranted fair value regardless of the look-back period employed.
There is no real valuation edge. PAVE is a very modest 0.5% below ST model value, and 1.0% cheap to LT model. But the aggregated picture of economic fundamentals, financial conditions and risk appetite point to a friendly backdrop for US infrastructure.
PAVE is an ETF of US single stocks that benefit from US infrastructure projects. It is all about macro. Short term model confidence is 95%; Long Term model confidence is 89%.
And what does the macro picture currently say? There is a strong uptrend in macro-warranted fair value regardless of the look-back period employed.
There is no real valuation edge. PAVE is a very modest 0.5% below ST model value, and 1.0% cheap to LT model. But the aggregated picture of economic fundamentals, financial conditions and risk appetite point to a friendly backdrop for US infrastructure.
