Key points:
Global markets end the year on solid footing. Historically, years with similar annual gains are typically positive the next year.
The value/cyclical trade is global in nature but likely does not have legs for longer than a quarter or two more.
The broadening into value, confirmed by high breakout totals in the U.S. and developed markets, is a positive nonetheless.
There is risk in continued U.S. earnings deceleration and in the lack of a global growth recovery.
The U.S. is our favored developed market and will remain so until signals from its relative performance tells us differently.
The U.S. presidential cycle heavily favors third years ( 2019 ), with fourth years still being positive, but more moderately so.
After an annual gain of 20% or more, the following year is up 8% on average and is positive two-thirds of the time.
Sectors with biggest potential: Energy ( catchup ), Health Care ( combined 2019/2020 growth and catchu p), Technology/Financial ( 5G, semis, software, payments, financial services ).
Europe and Japan ( near 25-year highs ) also have very favorable trends. Hong Kong has improved but remains riskier.
Top themes: luxury goods, multi-channel/specialty retail, outsourcing, health care ( pharma, supplies, systems/equip ), alt energy, semis/equip.
Emerging markets had a more mixed year, but large markets now generally have positive trends. Favored markets include Brazil, China ( A-Shares ), Taiwan, and India.
U.S. dollar weakness would be a welcome boost.
Recent South Korea/South Africa participation adds fuel.
Top themes: financials, consumer products, health service, semis/equip.
