全球投资策略-全球股票策略：行业加入奢侈品和可再生资源及其他变化

Global Equity Strategy Sectors: add to luxury and renewables and other changes Investment Strategy | Strategy A month ago, we started to add to cyclicals for the first time since July 2021 (see Cyclicals revisited: some changes, 5 May). As of now, the price ratio of cyclicals to defensives is discounting a PMI of 52 in Europe. We expect it to fall to c45. We raise luxury to benchmark (from underweight): It is a China-opening-up beneficiary, with c40% of end demand being Chinese (where policy has become more stimulatory, and we think China will focus on consumption/infrastructure); valuations are back to neutral levels (having been very expensive) for a sector that has structural growth with high barriers to entry; and wealth-to-income ratios are still very high in the US (supporting luxury). CS has Outperform ratings on LVMH, Puma, Swatch. We add to our overweight in utilities via renewables: From a macro perspective, European utilities tend to outperform when PMIs fall, and it is typically the best performing sector when the yield curve flattens (which it should do from here). There is a big policy tailwind, with both energy independence and decarbonisation helping this sector become more growth-like than in the past. Valuations look reasonable on FCF (10% on maintenance capex) and dividend yield relatives. Falling industrial commodity prices (from recent peaks) help margins. A peak in fossil fuel prices would also potentially help to reduce the political pressure on utilities. Our European Utilities team’s top picks are: Acciona, Enel, RWE. We reduce regulated utilities to benchmark: Valuations on P/E and P/RAB are at all-time highs. We think European and UK inflation expectations, unlike the US, are now realistic (UK and Italian regulated utilities have index-linked returns). UK water stocks have caught up with index-linked bonds, and we also see a risk of increased political pressure on water stocks. We take industrial gases down to benchmark, primarily on valuation (the P/E relative to growth and the P/E relative to European markets are close to all-time highs); the sector is defensive but discounting a -c10pt fall in PMIs. We slightly lower our overweight in big-cap pharma because we think most of the rise in commodity prices is behind us (pharma was the key defensive winner from this) and pharma is now discounting a large fall in PMIs close to 40. Why still overweight? i) Pharma is the biggest dollar earner (and we can see the dollar getting close to parity with the euro); ii) it tends to be the best performing sector when credit spreads rise (as pharma are lowly leveraged); iii) valuations look reasonable (unlike regulated utilities, industrial gases, or food producers where P/E relatives are close to or at all-time highs); iv) it ranks well on our scorecard (2nd overall and 1st on fundamentals—better than semis); v) earnings revisions are better than the market’s; and vi) we see little political pressure on drug prices near