Recovery Trades Still Have Legs

| Multi Asset

The losers of 2020 now stand to benefit from a strong cyclical recovery with rising real rates and upward inflation pressures: energy firms from higher oil and gas prices, financial companies from steepening yield curves, and industrials from a recovery in household and corporate demand. These stocks are under-owned, relatively cheap, and many have only recently recovered their COVID losses.

From 2000 until the end of 2020, a basket of “cyclical-heavy” indices (Russell 2000, TSX Composite, Euro Stoxx 50, FTSE 100) has outperformed a basket of “secular/growth” indices (S&P 500, Nasdaq, SMI, and MSCI EM) by 5.4% during periods of rising US real rates on average.


Recovery Trades Still Have Legs
Source: Bloomberg, Unigestion. Data as at 12 March 2021.

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