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EQUITIES COMMENTARY
May 22, 2017
Irrationally Exuberant Flight to Safety
While the post-election Trump reflation trade has lost some steam in the US in recent months as the President struggles to get his legislative agenda passed, European investors turned more optimistic in April after the first round of the French presidential election showed the pro-euro candidate as the front runner. Factor performances also diverged across regional markets as a risk-on trade prevailed in European and emerging markets, while US and developed Pacific markets moved more toward a risk-off stance (Table 1).
US: Investors disfavoured high risk shares and those with the highest demand to sell short, captured by 24-Month Value at Risk and Demand Supply Ratio, respectively
Developed Europe: Optimism fed into price trend indicators such as Industry-adjusted 12-month Relative Price Strength and toward small cap names gauged by Natural Logarithm of Market Capitalization
Developed Pacific: Valuation remained a preferred style across developed Pacific markets, with strong performance associated with factors such as Forward 12-M EPS-to-Enterprise Value
Emerging markets: Price momentum's rebound in March was reinforced last month with positive returns to Rational Decay Alpha
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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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