􀀗 We see some tentative signs that risk
appetite may be slowly moving off the
floor and a reflation-driven cyclical
bounce cannot be ruled out
􀀗 In response we close out our long-held
underweight positions on earlier cycle
consumer services sectors and scale
back our overweight on defensives
􀀗 We screen for ‘safer cyclicals’ –
companies with relatively strong
balance sheets that may also benefit
from any cyclical bounce
Signs of life
Evidence suggests that depression and deflation fears have
dominated market sentiment over the last few months, but
are we seeing some tentative signs that those fears are
beginning to subside? And if so, does this increase the
chances of a reflation-driven early cyclical bounce?
In our view, we think the answer to both questions is a lot
more open than many may think and we urge investors to
also keep an open mind. We see some tentative evidence that
we may be past the point of maximum pessimism and that
risk appetite may finally be moving off the floor.
Does this mean that we should be turning positive on earlier
cycle sectors? No, not yet. We think the outlook is still far
too uncertain and volatile to make this move. But, on the
same basis, we shouldn’t be too negative on them either.
In response, we have decided to close out these positions by
moving up to neutral on General Retail, Media and Travel &
Leisure. Our negative stance on these sectors has worked
well with all three sectors underperforming a very weak
market over the last couple of years. We finance the move
by scaling back our overweights in three defensive sectors
that have outperformed over the recent past: Health Care,
Mobile Telecomms and Utilities.
The report contains a stock screen that looks for ‘safer
cyclicals’ – companies that have relatively strong
balance sheets that should also benefit from any cyclical
bounce (see page 8).

Signs of life 3
Many indicators are showing tentative signs of life 5
Key forecasts 9
Portfolio 10
Back issues 11
Key charts and tables 13
Balance sheet and P&L account: FTSE 350
non-financials 14
Economic indicators 15
Profitability 17
Earnings and dividends 18
Interest rates 22
Valuation 24
Demand & supply 26
Miscellaneous 30
Performance & weights 35
Asset class returns 36
Index performance charts 38
1-month analysis 39
3-month analysis 41
6-month analysis 43
12-month analysis 45
Quarter-to-date analysis 47
Year-to-date analysis 49
Sector performance 51
Index and sector weights 53
All-Share constituent weights 57
Concentration 64
Appendix: methodology 67
Disclosure appendix 69
Disclaimer 71
Contents