Gavekal Capital: When the Strongest Sector in the Region Starts Breaking Down...

Thursday, October 16, 2014

When the Strongest Sector in the Region Starts Breaking Down...

As the region's only positively performing group so far this year, MSCI Europe's Health Care sector has had a particularly rough week, falling nearly 4% so far:

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Which sub-industries have been hit the hardest by the recent sell-off?  Pretty much all of them, with only minor losses/ a slight gain in what amounts to just three of the sector's individual stocks:

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And, while the group has undoubtedly reached oversold territory, past experience shows that it can remain there for quite some time.  Looking at some of these market internals, a case could be made for the correction to worsen from here:

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Has relative performance of European growth counter-cyclicals (a group comprised of health care and consumer staples companies) peaked?

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