Sectors

MacroQuant downgraded equities from neutral to underweight on a 1-to-3 month horizon. The model suggests increasing exposure to cash.

AI, EVs, and reshoring will lead to a massive surge in demand for electricity. Carbon-free, cheap, baseload nuclear energy stands to greatly benefit from these megatrends going forward.

The latest edition of our Big Bank Beige Book suggests the expansion remains intact, though weakness in C’s private-label credit card portfolio could be a harbinger of distress among lower-income consumers. We remain tactically neutral with a bias to turn defensive once clearer signs of a recession emerge.

Q1 earnings results of the largest US banks have demonstrated that the engine of recent growth in profitability, NII, has faltered as funding costs are rising fast. However, the resurgence in non-NII thanks to a revival in corporate activity has been a saving grace. Earnings growth appears to have bottomed, while valuations are attractive. To play up portfolio exposure to an upcoming surge in capital markets activity, and minimize exposure to declining profitability in traditional banking services, overweight Diversified Banks and Capital Markets, and underweight Regional Banks.

In this note, we preview the Q1-2024 earnings season, give our take on expectations and share what we will be watching.