00:00When it comes to the Mag7, a lot of the clients that I speak to, they want to diversify because they know that these companies, they're huge, they've done extremely well already, their valuations are high, and there are risks around them.
00:11It's not that they, some of them will likely be the big winners, but you do not want all your eggs in that one basket, definitely.
00:19I think the pushback I get is that there aren't that many places that they can see that there is super value, largely because things like Europe have performed well this year.
00:28On relatively little earnings growth, that's the other thing, we haven't really seen the earnings growth for Europe this year, earnings revisions have generally been downwards, so the valuation for Europe has just moved up, more so in Europe this year than you have in the US.
00:42So, yes, I do still think Europe is good value versus the US, and you can find value opportunities, banks, I would argue, is still one, maybe there are pockets of defence, etc., as we were just discussing, but I think it's, that valuation gap has narrowed a little bit.
00:56And let me ask you about quality stocks then, because, yeah, maybe value stocks have been lifted a little bit by the banking sector, but quality names in Europe then, Sharon, is that an area you focus on for next year?
01:06Or are you concerned that maybe they're too defensive, too dollar exposed if your dollar call is right?
01:11I mean, this is a very common question we're getting at the moment, and I think it's related to a few things.
01:16The key being, at this time of year, everyone is looking at performance year to date and saying, well, which areas have lagged, who's been behind, and therefore who could potentially catch up where I might want to grab a little bit of that.
01:27Quality stocks in Europe, and actually on both sides of the Atlantic, have generally underperformed this year.
01:34And in a way, that sounds unusual, doesn't it?
01:36You normally want to have quality, don't you?
01:38And I think for 15 or 20 years, certainly since the financial crisis, quality stocks generally did extremely well.
01:44They underperformed this year in favour of value and cyclicals and things like banks.
01:49I think an element, definitely, they've got better value now.
01:53Quality stocks were an enormous premium.
01:55That's come down a little bit, but they are dependent, I think, on two things.
01:59China doing a little bit better economically through this next year, and really these are all dollar earners.
02:06So if the dollar does continue to come down, then a lot of the quality stocks will be hit by that.
02:10So we will be more mixed on a rotation to quality.
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