ECB Asset Purchases Boost European Consumer Staples & Health Care Sectors by Jennifer Thomson, Gavekal Capital
Yesterday, we took a look at the relationship between the ECB’s balance sheet and a number of different economic and market indicators (see here), noting that MSCI Europe (red line, inverted) has tended to decline during past episodes of balance sheet expansion:
A further look into the relative performance of our baskets reveals some interesting trends. Cyclicals (the Consumer Discretionary, Energy, Industrials, Information Technology, Financials, and Materials sectors) have outperformed the MSCI Europe Index when assets on the ECB’s balance sheet were growing in the past, but generally show few signs of perking up so far:
Within the Cyclical basket, we differentiate between Early Cyclicals (Consumer Discretionary), Hyper Cyclicals (Financials, Information Technology), and Late Cyclicals (Energy, Industrials, Materials):
While the Early Cyclicals group appears to be enjoying the boost to performance that one might expect to result from a significant reflationary effort on behalf of a central bank, the Hypercyclicals remain un-impressed while the Late Cyclicals sectors continue to decline relative to MSCI Europe.
Turning to the Counter-Cyclicals (Consumer Staples, Health Care, Telecommunications Services, and Utilities), we find a more positive response to the ECB’s asset purchases:
In fact, Growth Counter-Cyclicals– those companies from the Consumer Staples and Health Care sectors– are on the verge of new highs relative to the MSCI Europe Index: