UBS Equities-Global Equity Strategy _The Theme-ometer Utilities are attr...-114048093

ab12 March 2025Global ResearchGlobal Equity StrategyThe Theme-ometer: Utilities are attractive as EU themes remain strongA market of themesWe leverage our REVS framework on a suite of thematic equity stock lists to objectively assess which themes should be more or less favored. REVS is our quantamental stock selection framework. Our philosophy is that stock prices are impacted by the macroeconomic regime (R), the operating environment for earnings (E), the market assessment of valuations (V), and sentiment (S). We have built models that give us a comprehensive tactical framework (2-6 months). Each model backtests well and they work well together. We have scores on global stocks and can aggregate them to countries, sectors, and in this note, we assess equity themes.Top themes and Top stocks European baskets remain strong with EU Defense Spending and EU Electrification appearing at the top of our thematic rankings. EU Defense Spending continues to score extremely well across our metrics, especially following recent big fiscal announcements. The one detractor may be that the basket overall is starting to look a bit expensive but BAE Systems and Thales SA are both among the higher ranking names that still appear attractive on our Valuation score.EU Luxury Goods is the top ranking theme this month, but we remain wary. The Sentiment and Regime scores, which are driving the overall ranking, are driven by the strong price momentum recently. However, this seems to be an overreaction to less than great earnings revisions along with shifts in positioning. We remain skeptical of the longer term outlook amidst questions about global growth.The US Consumer Cyclicals basket remains a top scoring theme this month as well with key names including Live Nation, VF Corp, Deckers Outdoor, and General Motors. US Consumer Cyclicals continues to have strong Earnings and Sentiment scores driven by positive earnings revisions and below average crowding. On the other side, the US Low Income Consumer (video) theme screens among the worst ranking again as the Regime and Earnings scores are a major detractor. US Defensives is a lower ranking theme currently, driven by the Food, Bev and Tobacco industry group. Specifically General Mills, McCormick & Co, and Mondelez International appear unattractive on our on Earnings, Regime and Sentiment scores. Utilities is now the highest ranking sector broadly across regions according to our scorecard. Media & Entertainment, Banks, and HC Equip & Srvcs are among the most attractive Industry Groups in the S&P 500. Chemicals, Consumer Dur & App, HH & Personal Products, and Construction Materials are among the worst scoring Industry Groups driven by Earnings, Sentiment, and Regime scores. What else is there?We also include a a country ranking in this report based on ACWI stock representation. Spain, Germany, and Italy screen as attractive country exposures this month broadly across scoring metrics. Spain has the strongest earning sco