Strategic Sector Selector - A cycle in transition

Strategic sector selector

The rally in global equities stalled in the third quarter of 2021 after a bout of disappointing economic data pointed to a slowdown in the pace of growth. At the same time, supply bottlenecks and surging energy prices contributed to concern about higher inflation. We believe the economic cycle is going through an adjustment phase to more sustainable growth rates and expect inflationary pressures to peak in the next 12 months. Therefore, we remain biased towards cyclical assets with the caveat that we expect limited returns over the next 12 months. While we increase our allocation to cyclical sectors, we seek a balance between early- and late-cyclicals and exposure to growth and value factors. With this in mind, we tilt late-cyclicals to a slight Overweight, while we selectively shift to Overweights in consumer discretionary and technology. Finally, we reduce our allocations to defensive sectors, which we expect to underperform.

Changes in allocations:

  • Upgrades: energy, travel & leisure (UW to N), basic resources, industrial goods & services, (N to OW), retailers, financial services (UW to OW)
  • Downgrades: telecommunications, utilities (N to UW), food, beverage & tobacco, healthcare (OW to N), media (OW to UW)
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Investment risks

  • 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

  • Data as of 30 September 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.