Global equities to stage a near-term rebound: UBS

UBS strategists suggested global equities could stage a near-term rebound, supported by an oversold price momentum that has historically led to positive performance.

According to UBS, the recent market sell-off has created a favorable environment for recovery, particularly for growth defensives, which the firm continues to recommend as an overweight position.

Strategists highlighted that price momentum as a style has become significantly oversold. When this happens, price momentum “has outperformed two-thirds of the time over the next month.”

This analysis is based on the performance of the MSCI ACWI Momentum index, which reflects the performance of an equity momentum strategy by focusing on stocks with high price momentum.

Interestingly, despite the sharp fall in TIPS yields—usually beneficial for growth stocks and tech—both sectors have underperformed. This anomaly adds to the potential for a rebound, as these sectors typically benefit from such a macroeconomic environment.

UBS also identifies specific sectors that are either overbought or oversold relative to their six-month moving averages.

Sectors like tobacco and utilities are noted as overbought, while semiconductors, luxury goods, hotels and leisure, software, and autos are seen as oversold, potentially offering opportunities as the market recovers.

When it comes to individual stocks, the most oversold companies in the US recently are Intel (NASDAQ:), Super Micro Computer (NASDAQ:), Celsius Holdings (NASDAQ:), DexCom (DXCM), and UiPath (NYSE:), among others.

Cybersecurity firm CrowdStrike (NASDAQ:) is also among the oversold stocks and is rated above average on UBS’s high-quality score.

The report stresses the importance of quality in the current environment, particularly when bond yields trend lower.

“When bond yields fall quality usually outperforms and although expensive, quality can outperform from these levels,” strategists said.