WPP Share News (WPP)

(ShareCast News) - Strategists at Credit Suisse stuck to their 'overweight' stance on Financials but cautioned clients that the current equity rally was over-extended, hence their decision to lift their allocation to 'defensive' shares to benchmark at the expense of cyclicals.Typically, a rally would see cyclicals outperform defensives by 20% but thus far they had done so by 24%, strategist Andrew Garthwaite said in a research note sent to clients.Furthermore rallies tended to occur in the early phases of an economic cycle, whereas the US, Japan and China appeared to be entering the later stages.The performance of cyclicals relative to defensives was discounting levels for the respective purchasing managers' indices consistent with GDP growth in the euro area and US of between 3% and 4% and a 3.0% yield on the benchmark 10-year US Treasury note.In one small positive, valuations on book and earnings measures in the US "are cleary expensive", Garthwaite said, although they were more neutral in Europe, he added.As regarded Financials, Garthwaite said they were cheaper than cyclicals, had "superior" earnings momentum and were positively correlated to rising bond yields, which in Germany were expected to hit 1.0% by the end of 2017 and in the US to 3.0%.On 70% of the ocassions during which cyclicals had been that 'overbought' relative to defensives they had gone on to underperform."Finally, sector risk appetite in the US, Japan and the UK is in 'euphoria' at a time when we think President Trump's policies could disappoint."Among the domestic demand plays the investment bank recommended focusing on were: CapGemini, SAP, WPP and Adecco.