Strategic Sector Selector - Staying the course

Global equity markets posted strong returns in 2021 Q1 after a double-digit rise in the final quarter of last year despite a renewed rise in infection rates in Europe, South Asia and South America. We think the improving economic picture and a large fiscal stimulus package in the US alongside an accelerating vaccination programme were the main drivers.
However, these also reignited concerns about rising inflation and higher rates prompting a rotation into late-cycle sectors. In our view, this may be premature, and we do not expect rates to rise in the next 12 months. Therefore, we remain Overweight most consumer discretionary sectors, which we view as the main beneficiaries of a gradual reopening in the next 6-9 months. We only make small adjustments to our model allocation by reducing energy to Underweight and raising basic resources to Neutral to account for the change in their relative value. We also close our Underweight in retailers as we expect their prospects to improve and downgrade banks to Underweight as we believe most of their potential margin improvement may have been priced in. Finally, we retain our Overweights in food, beverage & tobacco and technology as defensive hedges.
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
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Data as of 31 March 2021 unless stated otherwise.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.