Our Changing Global Sector and Industry Perspectives
Global equity markets have rallied significantly since the lows in October 2022 and continue to move higher during 2023 in the face of continued economic uncertainty. In this monthly note, the Active Equities team review the major changes in our global sector preferences since the market lows in October 2022.
Figure 1 below highlights the best performing sectors since mid-October 2022. All sectors are positive since October 2022. The largest increases came from within Technology, Communications and Consumer Discretionary. In many cases the biggest rallies came from stocks which had derated the most in the 2022 correction.
Our Sector Preferences Oct 2022 and Apr 2023
Figure 2 provides a perspective on our preferred sectors from the MSCI World All Country World Index. It maps the sectors from least to most preferred, and from lowest to highest risk. The blue bubbles provide the perspective as at 19 of April 2023 and the grey bubbles as at 14 October 2022.
Figure 2: Our Global Sector Preferences (14 October 2022 and 19 April 2023)
Observations
- In mid-October 2022, Energy was the most preferred sector but has since moderated.
- The Technology sector outlook has improved but is now the most risky out of all sectors.
- Health Care remains one of the most preferred.
- The global Financial sector which covers insurance, capital markets, financial service, and banks has now moved up the rankings but has also become more risky. The outlook for Real Estate has also declined.
- Consumer Discretionary has improved both in terms of risk and preference.
Figure 3 highlights the most, and least, preferred sectors by Quality, Value and Sentiment. Energy ranks well on Quality and Value, but poorly on Sentiment. Financials rank well on Value and Sentiment, but lowest in terms of Quality. Note the positive sentiment score for financials is mostly from an improved outlook for insurance and financial services (not the banking industry). The global banks now rank better on value which has improved the value ranking for the broader financial sector. The positive outlook on Healthcare is underpinned by Quality and Sentiment. The improvement in technology sector has been driven by sentiment and mostly from within software and semiconductors, as well as hardware and equipment.
Figure 3: Our Global Sector Preference by Theme
Most Preferred sectors |
||
| Quality | Value | Sentiment |
| Energy | Energy | Financials |
| Health Care | Financials | Information Technology |
| Utilities | Materials | Health Care |
Least Preferred Sectors |
||
| Quality | Value | Sentiment |
| Consumer Discretionary | Industrials | Energy |
| Materials | Consumer Discretionary | Materials |
| Financials | Consumer Staples | Real Estate |
Source: SSGA, Active Equity rankings are based upon the proprietary scores which assess company quality, value and sentiment. The table provides the top ranked sectors within each theme. Averages are calculated for GICS sectors for companies within the MSCI All Country World Index universe as at the 19 April 2023.
Bottom Line
The last 6 months has seen significant rallies in the face of continued economic uncertainty. Technology and Consumer Discretionary sectors have outperformed and have seen improved rankings since October 2022. Technology, Materials and Real Estate sectors have all moved up the risk scale. Health Care companies remain a preferred sector.