Three big things you need to know: First, across the globe most of our analysts are optimistic on performance in the year ahead, with favorable views on the impact of potentially lower interest rates and, to a lesser degree, favorable views on valuations. Second, in the US, the only region where we do formal strategy sector recommendations, we remain overweight Financials, Energy, and Health Care. We downgraded Tech to market weight, upgraded Consumer Discretionary to market weight, and upgraded Utilities to overweight. Third, in Europe, Canada, and Australia our analysts’ top sectors according to the survey varied, but Utilities was among the top sectors in the eyes of our analysts in each.

If you’d like to hear more, here’s another 5 minutes.

Starting with Takeaway #1, across the globe most of our analysts are optimistic on performance in the year ahead, with favorable views on the impact of potentially lower interest rates and, to a lesser degree, favorable views on valuations.

• The positive bias on performance outlooks and impact of interest rate relief was true for all of our coverage regions and was also in place for most sectors on a global basis.

• One thing that jumped out to me on performance outlooks was that views weren’t particularly extreme. Just three teams were very bullish (European Apparel Retail, US Large Cap Banks, and Australia Base Metals & Bulks) and just 5 teams were bearish (US Internet Social Media & Search, US Internet Retail & Travel, Australia Food Distributors, European Pharmaceutical Services, and Canadian Airlines & Aerospace.

• Regionally, we saw the most constructive views on valuations in Europe and Canada.

Takeaway #2, in the US, we remain overweight Financials, Energy and Health Care. We downgraded Tech to market weight, upgraded Consumer Discretionary to market weight, and upgraded Utilities to overweight.

• We’ll start with the legacy overweights:

o On Financials – Our analysts are constructive and we like the sector’s attractive valuations and improving earnings revisions trends, as well as it’s tendency to outperform when ISM manufacturing and consumer sentiment rise suggesting to us the sector should benefit if expectations for the US economy improve.

o On Energy – Our analysts are also constructive and we like the sector’s attractive dividend yield and valuations. The sector tends to underperform when 10 - year yields are falling as well as when consumer sentiment improves, making our overweight a hedge against the soft landing/moderating interest rates narrative.

o On Health Care – Our analysts are also constructive, and we like the sector’s reasonable valuations, stabilizing outflows, and tendency to outperform when consumer sentiment improves and interest rates fall.

• Moving on to the changes:

o On Utilities – our analysts have a modestly positive performance outlook, valuations have improved on our model, EPS revisions are slightly positive again, and the sector tends to outperform when interest rates are falling. So we’ve upgraded to overweight.

o On Tech – our analysts are neutral, flows have turned abruptly negative, and valuations have turned highly expensive for the median stock – something we didn’t see a few months back. The sector simply no longer feels like an overweight to us, so we’ve downgraded to neutral.

o On Consumer Discretionary – our analysts are neutral and we see fair valuations rather than cheap ones on our model, but EPS revisions have improved and the sector tends to outperform when interest rates are falling. The sector no longer feels like it deserves an underweight so we’ve upgraded to neutral.

• With these stances and moves, we are now tilting more towards Value and defensives, which syncs up with our view that there’s more opportunity in Value than Growth in the year ahead and that the broader market seems in need of a pullback.

Wrapping up with Takeaway #3: in Europe, Canada, and Australia our analysts’ top sectors according to the survey varied, but Utilities was among the top sectors in the eyes of our analysts in each.

• Our European analysts are most constructive in their performance outlooks for Materials, Utilities, Consumer Discretionary, and Financials.

• Most of these sectors also look interesting on our own strategy tools. Utilities has positive EPS revisions, attractive relative valuations, and positive flows. Financials has positive EPS revisions and attractive valuations. Consumer Discretionary tends to outperform when interest rates are falling and consumer confidence is rising.

• Our Canadian analysts are most constructive in their performance outlooks for Communication Services, Consumer Staples, Energy, Health Care, REITs, and Utilities.

• These sectors all look attractive or reasonable on our own valuation model. Communication Services, Staples, REITs, and Utilities also tend to outperform when interest rates are easing, while Communication Services and REITs tend to outperform when consumer confidence (which has been declining and is now near COVID lows) is rising.

• Our Australian analysts are most constructive in their performance outlooks for Communication Services, Materials, Industrials, and Utilities.

• On our own strategy tools, Materials and Industrials stand out as areas with positive EPS and sales revisions trends in place, Utilities stands out for attractive valuations, and Industrials and Communication Services stand out for a tendency to outperform when interest rates are falling.

That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.