In this Executive Summary, we introduce the inaugural edition of a regular monthly update of our regional and sector strategy models, both of which explicitly take into account Environmental, Social & Governance (ESG) factors.

  • More defensive — We extend our relatively defensive posture given more pockets of economic weakness globally.
  • Regional strategy — We upgrade CEEMEA to Neutral from Underweight as valuations have become more reasonable, although the earnings outlook for the region continues to deteriorate.
  • Sector strategy —We upgrade Health Care to Overweight from Neutral reflecting a relatively strong earnings outlook.

In this inaugural edition of a regular monthly update of our regional and sector strategy models, we make some changes to our weightings:

  • We upgrade the Central and Eastern Europe, Middle East and Africa (CEEMEA) region to Neutral from Underweight as valuations have become more reasonable.   We downgraded CEEMEA to Underweight in June when premature optimism about the situation in Ukraine prompted a rebound in the Russian stock market.  However, the earnings outlook for CEEMEA has continued to deteriorate, suggesting that the region is unlikely to become attractive any time soon.  (Our previous regional recommendations were published in the June edition of The Cornerstone Journal of Sustainable Finance & Banking.)
  • We upgrade Health Care to Overweight from Neutral reflecting a relatively strong earnings outlook that outweighs the sector’s high valuation.  As discussed in Appendix 2: The Conceptual Framework, the sector model gives a heavier weighting to earnings (75%) than the regional model where valuation and earnings are equally weighted.  (Our previous sector recommendations were published in the Summer 2014 edition of The Cornerstone Journal of Sustainable Finance & Banking.)
Regional Rankings
Arrows Indicate Changes vs. Last Month
Regional Rankings   Arrows Indicate Changes vs. Last Month
Sector Rankings
Arrows Indicate Change vs. Last Month
Sector Rankings Arrows Indicate Change vs. Last Month
Michael Geraghty is the Global Markets Strategist at Cornerstone Capital and formerly the founder of Informed Investor, LLC a consultancy specializing in thought leadership that produces bespoke research reports for institutional investors. Michael has over three decades of experience in the financial services industry including working as an investment strategist at UBS and Citi.