Value-based Cyclical shares, laggards in last month’s European sell-off, are starting to outperform their defensive peers.
Receding worries about the trade war, an improving geopolitical (Hong Kong) and fiscal (Venezuela) climate, and expectations of monetary stimulus have improved investor sentiment and pushed bond yields higher. That has hurt defensive sectors such as utilities, health-care and real-estate — often seen as bond proxies — while banks, miners and automakers are posting strong returns.
While the cyclical/defensive rotation has not been as evident in the U.S., the shift from growth to value cannot be ignored.
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