We turn tactical LONG (previously NEUTRAL). The market has digested the weaker-than-expected US labour data, as well as notable style rotations. Growth stocks lagged behind Value stocks, and Mega Caps underperformed SMID Caps.
However, the headline index remained stable. This resilience, combined with valuation normalisation, especially in the IT sector, and favourable seasonality, suggests a more constructive stance for the asset class heading into Q4.
From a regional perspective, we upgrade the US to LONG (previously NEUTRAL). We remain LONG on Japan, stay NEUTRAL on Europe and EM, and maintain a SHORT position in the UK.
From a sector standpoint, we recommend increasing exposure to cyclical AI-related sectors (previously, we took a barbell approach to market beta).
Pharma remains our favourite defensive sector.
Strategically, we reiterate our OVERWEIGHT stance on equities and view any market weakness as a buying opportunity. We expect the global benchmark to reach new highs in Q4 and accelerate in 2026, driven mostly by high single-digit EPS growth. Already rich valuations limit gains from multiple expansion, which was the main driver of last year’s rebound.
Key themes for 2026 are:
1) Monetary Policy: we expect two Fed cuts by the end of 2025 and a further three cuts in 2026. Historically, when the Fed holds rates for at least six months and then cuts, equities tend to perform well in the following year.
2) Fiscal Policy: it is expected to be expansionary on both sides of the Atlantic, supporting CAPEX investments and corporate profitability.
3) Earnings: we project global EPS to increase by 8% in 2026, compared to the consensus forecast of 12% growth. We anticipate further analyst downgrades ahead, which could lead to volatility in equities; however, this is unlikely to derail the stock market’s upward trajectory.
4) Valuation: the global stock market is flirting with bubble territory. Our composite valuation indicator shows equities are nearly two standard deviations more expensive than their 10-year average. That said, high valuations do not necessarily imply negative returns over the following 12 months.
Regionally, we prefer the US and EM due to their predominance in the AI space and idiosyncratic catalysts such as monetary and fiscal easing in the US, an expected weaker USD, and light positioning within EM. Sector-wise, we favour Cyclicals over Defensives, with a bias towards growth-oriented names.
COSIMO RECCHIA
Senior Equity Strategist
FRANCESCO PONZANO
Junior Equity Strategist
Download full document
Marketing material for professional clients or qualified investors only.
This material does not constitute an advice, an offer to sell, a solicitation of an offer to buy, or a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or transaction. ANIMA can in no way be held responsible for any decision or investment made based on information contained in this document. The data and information contained in this document are deemed reliable, but ANIMA assumes no liability for their accuracy and completeness.
ANIMA accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material in violation of this disclaimer and the relevant provisions of the Supervisory Authorities.
This is a marketing communication. Please refer to the Prospectus, the KID, the Application Form and the Governing Rules (“Regolamento di Gestione”) before making any final investment decisions. These documents, which also describe the investor rights, can be obtained at any time free of charge on ANIMA website (www.animasgr.it). Hard copies of these documents can also be obtained from ANIMA upon request. The KIDs are available in the local official language of the country of distribution. The Prospectus is available in Italian/English. Past performances are not an indicator of future returns. The distribution of the product is subject to the assessment of suitability or adequacy required by current regulations. ANIMA reserves the right to amend the provided information at any time. The value of the investment and the resulting return may increase or decrease and, upon redemption, the investor may receive an amount lower than the one originally invested.
In case of collective investment undertakings distributed cross-border, ANIMA is entitled to terminate the provisions set for their marketing pursuant to Article 93 Bis of Directive 2009/65/EC.