Executive Summary

Regional Strategy: Upgrade UK; Remain Positive on Russia. This month the UK is being upgraded, largely reflecting a continued improvement in earnings momentum. In contrast to Russia — our other top-ranked country — corporate governance in the UK is among the best in the world.

Sector Strategy Unchanged. Financials remain the most favored sector; Health Care the least favored. Information Technology is looking increasingly attractive, although valuation remains an issue.

Real Estate GIC Added as a New Sector. MSCI added Real Estate as a new sector, increasing the number of GICS sectors to 11. While the sector looks cheap, its earnings outlook is unfavorable. Then, too, the sector’s ESG risk profile is likely among the highest of the GICS sectors.

Figure 1: Regional Rankings                           Figure 2: Sector Rankings                 

2017-jan-strat-fig-1 2017-jan-strat-fig-2

Source: Cornerstone Capital Group

 

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Michael Geraghty is the Global Equity Strategist for Cornerstone Capital Group. He has over three decades of experience in the financial services industry including working as an investment strategist at UBS and Citi.