UBS Equities-US Equity Strategy _The Theme-ometer Signs of improvement f...-117249617

ab14 August 2025Global ResearchUS Equity StrategyThe Theme-ometer: Signs of improvement for less favored themesA 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 as well as indices, sectors and industry groups globally.Thematic rankings
AI-Everything remains on top this month (Semis, Software, Winners, Power). Valuations and crowding are high but price momentum and the late cycle growth regime are still very supportive. Top scoring stocks in those themes include Broadcom, Oracle, Meta, Talen Energy, ServiceNow and Snowflake.
EU Defense Spending continues to slide lower. Earnings revisions have stalled recently which is often a problem when stocks are expensive and crowded. Top scoring stocks are Leonardo, Thales, BAE and Rheinmetall.
Pharmaceuticals and GLP-1 Winners moved up our thematic rankings following a disappointing Q2 earnings season. We are not yet ready to be bullish on Health Care in the US but signposts suggest that pressing shorts would be misguided. Negative revisions in US Pharma & Biotech have slowed considerably and relative valuations are ~1.7 stddev below average since 2010.
EU Electrification and EU Renewables continue to improve. Investors have been neutral or underweight these stocks and missing the resilience and upside bias to earnings revisions. For renewables, this is a reversal of a multi-year downgrade cycle but where the causes of that (cost inflation, rising rates, low asset turnover) are all abating or reversing. Scores suggest looking at Siemens Energy, ITM Power and Iberdrola for stock exposure.
EU Consumer themes are at the bottom, though the scores are not materially negative. This includes EU Luxury Goods that are oversold and valuations have cheapened. If earnings revisions stabilize, these may become appealing again.Countries and Sectors
Asia region remains strong in our country rankings. TWSE (Taiwan), HSI (Hang Seng) and KOSPI2 (South Korea) remain high on the list currently. This reflects more positive regime, valuation and crowding signals. If earnings revisions were to stabilize or tick higher, we would expect to see material outperformance.
Europe is ranking below the US due to wide score dispersion. Europe is an alpha market (not beta) because tariffs, currency and Chinese demand weakness/competition continue to negatively impact half the European market. However, Europe's top sectors (Telecoms, Uti