July unfolded in much the same manner as June, with the continued decline in US 10-year Treasury yields corresponding to a further narrowing of equity market leadership; the technology-heavy NASDAQ led the S&P 500, which in turn led its European counterpart. "Peak economic-growth" anxiety and delta variant concerns held the narrative and triggered a mid-month sell-off, with cyclical/value names the most eagerly shed, just before entering the bulk of the quarterly earnings reporting season. We are well-conditioned to expect outsized and often disproportionate share price reactions immediately after company results. Such is the weight of short-term positioning in markets, and the second quarter was no exception, exacerbated by thin volumes and a market struggling for direction. However, a notable observation – one supportive of our anticipation of a broader market even in the event of persistently low interest rates – was the impressive delivery from companies that the market had been quick to punish just a week or two earlier for having the wrong attributes at 'factor' or 'basket' level.

We were encouraged to see several stock specific attributes rewarded among the earnings results season noise and four out of the top five contributors to performance in July were from our "cyclical" or "value" positions: UPM Kymmene (paper, packaging and forestry products), ArcelorMittal (steel), Hugo Boss (apparel), and ASR Nederland (Insurance).

In July, our overall activity reduced the value tilt and beta of the portfolio through the trimming of early-cycle and industrial names along with the exit from positions in AIB and Santander (banks are always our most tactical of hedges against inflation and rising rates). Conversely, we initiated new positions in Legrand and Atlas Copco (defensive, quality and late-cycle attributes respectively) while adding to increasingly high conviction names such as Danone (a position initiated in June).



References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security. Janus Henderson Investors, one of its affiliated advisor, or its employees, may have a position mentioned in the securities mentioned in the report.