A New Leadership Group In Europe? by Jennifer Thomson, Gavekal Capital Blog
Year-to-date, the best performing sectors in developed Europe have been Consumer Discretionary (10.94%), Consumer Staples (10.78%), and Health Care (7.83%).
Since the August low, the Energy sector has bested all others, gaining nearly 13%. Have we witnessed a dramatic change in leadership for the region? Probably not. What is interesting, though, is that Consumer Staples (and, to a lesser extent, Consumer Discretionary) has continued to perform well off the lows while Health Care has struggled the most–and is one of just three sectors to have gained less than 1% over the last month and a half:
These hard numbers confirm trends we have begun to notice in some of our point-and-figure charts.
Quite a few prominent Health Care names have violated important levels of support and appear to be at risk for further meaningful correction:
By contrast, companies from the Consumer Staples sector that have struggled for some time appear close(r) to more positive developments:
For now, the surge in the Energy sector in Europe (and the rest of the world) seems to represent a tendency to bottom-fish among the year’s most troubled stocks. We have our eye on the admittedly less glamorous, more long-term rotation between the region’s Growth Counter-Cyclicals as the dominance of Health Care stocks wanes and Consumer Staples companies find their technical footing, with room to improve.
