Pharmas & Financials lead YTD
With all the hype about technology, it is interesting to pinpoint that the European sector ytd performance (to end August) was driven by Pharmas, Banks and Insurance after all. Software managed to squeeze itself into third position only thanks to the spectacular performance of SAP as the (near) only European ‘tech’ stock. Without SAP, the sector would have lost 14%.
YTD sector performances
Leading sectors (ex Software) intrigued as substantially all stocks participated to the performance. What about a NatWest sitting next to a BCP or a Unicredit, performance-wise (60% + ytd)? For Pharmas, Novo’s initial traction has been complemented by a UCB, a Lonza or an AZN.
For sectors which lost the ytd plot (from Autos down to Metals & Mining), the picture is of conflicting individual performance but most sector heavy-weights have lost a lot of feathers. F&B, historically a bigger sector than Banks, now weighs a mere €740bn after the likes of Nestlé, ABI or Diageo lost 4% or more ytd.
One may contend that the strong Stoxx600 performance ytd to 30-08 (c. 12%) is rather broadly based and thus healthy. Over the last 8 months, it has hinging less on a small number of large caps than widely believed (including by us). It is also clear that the rate cuts narrative has not been central to individual sector performance, except may be for Real Estate where hope reigns supreme.
Next 4 months Pythia?
Volatility returned on 3 & 4 September with US and Asian Techs taking a beating. It is a reminder that a good chunk of the market is trading on extended valuations, notably the bigger caps. If nervosity creeps in, the sectors highlighted in yellow are worth questioning. Software is a pure SAP bet which itself has been a tech sector proxy. Caution is probably required. For Consumer Durables/luxury, there are no indications of any improvement of consumer sentiment in China when it comes to big ticket items. Chemicals are seriously expensive these days on a combination of Linde- and Givaudan-like valuations. Much is at stake when it comes to earnings expectations (+22% in 2024 and +16% in 2025). Here too preparing for the worse would be reasonable. Health (ex Pharma) stocks are too expensive for comfort. Pharmas can probably resist a bout of volatility. Semiconductors is a bet on ASML on which AlphaValue has no worries.
YTD sector performances
Leading sectors (ex Software) intrigued as substantially all stocks participated to the performance. What about a NatWest sitting next to a BCP or a Unicredit, performance-wise (60% + ytd)? For Pharmas, Novo’s initial traction has been complemented by a UCB, a Lonza or an AZN.
For sectors which lost the ytd plot (from Autos down to Metals & Mining), the picture is of conflicting individual performance but most sector heavy-weights have lost a lot of feathers. F&B, historically a bigger sector than Banks, now weighs a mere €740bn after the likes of Nestlé, ABI or Diageo lost 4% or more ytd.
One may contend that the strong Stoxx600 performance ytd to 30-08 (c. 12%) is rather broadly based and thus healthy. Over the last 8 months, it has hinging less on a small number of large caps than widely believed (including by us). It is also clear that the rate cuts narrative has not been central to individual sector performance, except may be for Real Estate where hope reigns supreme.
Next 4 months Pythia?
Volatility returned on 3 & 4 September with US and Asian Techs taking a beating. It is a reminder that a good chunk of the market is trading on extended valuations, notably the bigger caps. If nervosity creeps in, the sectors highlighted in yellow are worth questioning. Software is a pure SAP bet which itself has been a tech sector proxy. Caution is probably required. For Consumer Durables/luxury, there are no indications of any improvement of consumer sentiment in China when it comes to big ticket items. Chemicals are seriously expensive these days on a combination of Linde- and Givaudan-like valuations. Much is at stake when it comes to earnings expectations (+22% in 2024 and +16% in 2025). Here too preparing for the worse would be reasonable. Health (ex Pharma) stocks are too expensive for comfort. Pharmas can probably resist a bout of volatility. Semiconductors is a bet on ASML on which AlphaValue has no worries.
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