That’s put Fabiana Fedeli, global head of fundamental equities at Robeco, in an allocation bind. While the fundamentals of such northeast Asian markets are recovering faster, dollar assets typically outperform in a recession.

Overall, earnings revisions have been worse for developed markets than emerging ones this year, a trend that’s likely to continue, she said.

“It is very unlikely that we will see a straight line up from here, and we should get ready for another correction,” she wrote in a note.

Given the uneven toll wrought by the virus, stock picking by country selection is key. While emerging markets such as Brazil or India may struggle to stem the fallout, North Asian markets will prove more resilient than developed nations, she said.

With growth equities trading at the highest versus value names since the dot-com era, American shares are also more vulnerable to a rotation in investing styles. An equal-weighted version of the S&P 500 is close to the lowest versus the benchmark since 2009, proof that the largest names have fueled most of the gains.

“What we are not seeing yet is a return to a market fueled by a preference for higher-risk investment targets such as small caps, high-beta stocks, and value stocks,” said Masanari Takada, a quantitative strategist at Nomura Holdings Inc.

Equity hedge funds, he estimates, are still bullish on defensives but bearish on cyclicals. Companies with global sales have also outperformed those that sell locally over the past month as domestic consumption vanishes, Goldman baskets show.

The upshot: the old rule of taking refuge in U.S. stocks should get more scrutiny this time around. At Societe Generale SA, strategist Sophie Huynh reckons the market has only priced in a “soft lockdown” lasting up to 1 1/2 months, so anything longer could hit prices further.

“The sell-off was indiscriminate -- the rally is really discriminate,” she said. “For the rally to be sustainable, we would need other sectors.”

This article provided by Bloomberg News.

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