The US and Global Emerging Markets are currently in the contraction phase of the business cycle, whereas Europe is still a step behind, according to J.P.Morgan’s Quantitative Macro Index (QMI).
The QMI is a proprietary JPMorgan system that uses growth, inflation, liquidity and sentiment indicators to identify the phase of the business cycle (see Chart 1). At present, according to the report produced by Dubravko Lakos-Bujas, their US Equity Strategist, the US and Emerging Markets are currently in the Contraction phase of the cycle where it makes sense to be long Quality and Low Volatility, neutral Growth and to be rotating out of Momentum into Value stocks.
Lakos-Bujas says that Europe, however, is in the Slowdown phase, where Momentum, Growth, Quality and Large Caps should be favoured over Value, High Volatility and Small Caps.
See Chart 1.