Diversification: the golden rule in question

The diversification of risks becomes a key again for beneficiaries in the end of American exceptionalism. Nevertheless,

The a posteriori observations are always easy to make (the famous backtrading). However, and the following is no exception to the rule: on the fifteen years following the great financial crisis which saw the disappear Lehman Brothers, there was not really any questions to ask for the beneficiaries: a 60/40 mix of American active ingredients made it possible to obtain an extraordinary Sharpe ratio. Therefore, During this long period, the golden diversification rule as a vector of better couple yield/risk was largely inoperative.

But the valuation bonus of “winners” (American) on “losers” (rest of the world) which had reached record levels. Therefore, the catalyst of a lower dollar pushed international investors to review diversification: golden rule question their copy this year. For example, Result, a significant performance difference in the first half between European equity markets and their American counterparts in euros¹. Furthermore, The recent catch -up of Europe leads to questioning again as to the allowance within the Active Action class. Meanwhile, for the second semester. Meanwhile, And this, from the angle of stock market capitalizations, style factors and geographic areas.

Ever more concentrated markets

The concentration phenomenon is well known in the United States due to the preponderance. Consequently, of technological values. Consequently, After the rebound of the Big Tech Post Deepseek complex. Moreover, Liberation Day, the sector represents a third of the index, is its largest weighting from the Dotcom bubble. A sign of S&P times has launched. in partnership with Goldman Sachs, a “US 500 ex Mag7 index” (X7 index), to avoid the risk of concentration of the S & P500 on diversification: golden rule question the magnificents 7. This new index will serve in particular as a cover tool without taking the risk of alphabet. Amazon, Apple, Meta, Microsoft, Nvidia, or Tesla.

The American SMIDs are trained, while this European segment begins to outperform.

But the concentration phenomenon now affects Europe: in the first half. 16% of the market capitalization of the Stoxx600 is responsible for 54% of its increase. Without financial and industrial (including defense), the increase in the index in the first half would only be 1.8%!

This configuration leads to a first reflection on the capitalization size factor. The American SMIDs are trained, while this European segment begins to outperform. This change of trend should be led to extend with regard to the valuation (PER 2026 of 12x for. the MSCI Emall CAP VS. 14x for the MSCI EMU) and the wide exposure to German initiatives.

As for style factors, they diversification: golden rule question played in a very different way on both sides of the Atlantic. In Europe, the Value style has been running in mind since 2022 with banks as a spearhead. Conversely. the under performance of the “quality” factor over the same period is marked, in particular due to the exporting companies components this subset. The deracting of the quality style has reduced its recovery online online with its long -term history (1.4x against levels above 2x before the Pandemic of Covid). This return to the average should encourage investors to take an interest in this part of the side again.

On the American side, the differences are even more flagrant: the growth style to outperform the value of 14.4% in the second quarter, unheard of for 25 years. This relative performance gap places the value segment at most for 30 years! Such a difference should also bring it to a re diversification: golden rule question -examination of the positioning, on the basis of valuations.

Divergent valuations. perspectives

Finally, share revisions by action argue in favor of the United States, especially due to the dollar: consensus is now awaiting BPA growth +2.1% in Europe for this year (against +7.4% at the start of the year) and +9.2% (against 14.2%) in the United States. If expectations for the second quarter are confirmed (+5% yoy against 0% in Europe). this differential should allow the American market to make a catch with the second half of the semester, when being a dollar lower has become very consensual.

For many years. the low -rate rate of central banks coupled with American exceptionalism has made the concept of diversification unfit to improve the adjusted yield of the risk of wallets. The end of unconventional monetary policies. Additionally, the return to affairs of the unpredictable Trump again make the environment conducive diversification: golden rule question to the application of the golden rule. Indeed. the performance differences in the various factors specific to the Active Action class (size, style, zone) in the first half show that this analysis grid is again relevant. In summary, to outperform the watchword is now to diversify!

¹ +6,65% vs. -7,18%.