• Equity markets continued to grind higher this week amid some mixed US – China trade newsflow. Emerging markets lagged the Developed and are now the worst performing region ytd, even below the UK. Market leadership was defensive as bond yields fell.

• Over the last couple of months, equity markets have witnessed a strong rotation in internals with Value, Cyclicals and Banks leading. This week some consolidation / profit taking in Cyclicals, as bond yields fell, was seen. The common pushback from clients is that the rotation will not last, and that if it did, it would be a problem for the broader market. Our Global Equity Strategists disagree with these pushbacks. They remain bullish on the overall equity market, and call for a continuation in style rotation. Since the low in September, European Cyclicals have outperformed Defensives by almost 1000bp, but that is typically only half of the past runs. The starting point remains stretched, and fundamentally a turn in PMIs should lead to a sustained rotation. They continue to believe that style and sector rotation will be seen as a positive for the overall market direction. The recent market behavior appears to confirm this, and historically Value worked when markets were rising.

JPMorgan