1. Equity bears need a Plan B?
2. Poor risk-reward in credit
3. Bonds vs Commodities: more to give
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1.Equity bears need a Plan B?
As high beta & momentum areas of the market wobble, equity investors are once again thinking about allocations to more defensive areas of the market. Consumer Staples versus Consumer Discretionary is an obvious RV pair to consider in that scenario but, relative to macro, Staples have already moved a long way.
In market cap terms, XLP sits 1.1σ (6.3%) rich to XLY. In equal weighted terms, RSPS sits 2.4σ (8.8%) rich to RSPD. That is towards the very richest end of Qi FVG ranges.
Both models show Staples defensive properties. Higher VIX, wider credit, slower economic growth support Staples outperformance. That means macro fair value is inflecting higher for both - macro conditions support XLP / RSPS.
But markets have moved ahead of macro momentum. In short, equity bears should know these aren’t optimal levels to chase & maybe try to find alternative safe havens.
Continue reading our analysis by downloading the PDF above
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