Are we about to see a reversal in fortunes from the Global Consumer towards the Global Manufacturer?
It strikes us the past three years or so have been all about the consumer, China re-balancing, structural growth in EM and of course low FED rates buoying the American, the biggest buyer of all. Now rates are starting to normalise meaning corporates are more inclined to INVEST (as de-equitising loses some appeal), China has reminded us of her sensitivity to external factors (exports) and Japan is a positive tail-wind the first time in a decade, it looks likely a global CAPEX cycle is soon to begin, coming at a time of general apathy towards most things PMI related like Steel, Miners, Cement and Paper. If little else the arguments to stay underweight are becoming harder to identify, suggesting mean-reversion if little else could prove a powerful driver in its own right. Remember, it is often not what you own that hurts performance, but what you don’t and you don’t own China Manufacturing (or her proxies).
So, in Europe, we would add to:
UPM-Kymmene
Schneider
Holcim
Rio Tinto
ArcelorMittal
ThyssenKrupp
Voestalpine
Vallourec
and in the US:
Emerson
Caterpillar
3M
FedEx
Parker
