It likes companies with high and sustainable dividends, while mega caps
- typically household names and bellwether stocks in their respective industries - are best able to withstand periods of economic weakness but do not tend to grow as fast as smaller companies in good times.
Regarding our investment outlook, one of the main themes we emphasized at the beginning of the year was that stocks would outperform bonds, with some of our specific preferences being for mega caps
and emerging markets.
Two times as many mega caps
have positively surprised versus the smallest stocks, and earnings for the small cap benchmark are coming in below expectations (where analysts already expected a year-on-year earnings decline), with less than 30 per cent beating on earnings per share and sales," she wrote in a note to clients.
However, the geopolitics of Ukraine/Russia, banking crises in Portugal, Austria, Italy, deflation risk in the Eurozone on the eve of the ECB stress test and a bias to defensive markets (Switzerland, thanks to the pharma weighting in the SMI index due to mega caps
Novartis and Roche Holdings was the best performing market in Europe during the correction) mean it is premature to expect any bull run in Europe.