Traditional financial market relationships have been stress-tested by COVID-19, economic lockdowns and aggressive central bank actions. Citi analysts highlight the most interesting breakdowns and potential investment implications.

Equities Decouple From Earnings: Dips in Earnings-Per-Share (EPS) forecasts usually drive falls in equity markets, but not this time. Instead, central banks have helped drive the rally. This means global equities trade on 20x 12m fwd EPS, up from 16x at the start of the year. Economic recovery now looks priced in.

Equities Decouple From Bond Yields: Equity rebounds are usually accompanied by higher government bond yields, but not this time. Equity indices have moved to discount recovery but rates markets remain muted.

US Equities Decouple From COVID-19 Cases: Earlier in the pandemic, US equities tracked new cases, but no longer. The market has rallied despite a resurgence in cases. However, US equities could be vulnerable to further lockdowns.

Growth Decouples From Value: Growth and value usually rally together, but not this time. The MSCI Global Growth index is back to its February high; the Value index is down 15%.

Past performance is no guarantee of future results. Real results may vary.

Cyclical/Defensive Trade Decouples From Equities: Rallies are usually associated with outperformance by cyclical stocks, but not this time.

Banks Decouple From Equities: Banks usually lead market rebounds, but not this time. Instead, Banks stocks have stayed down as bond yields have stayed down.

Energy Stocks Decouple From Oil Price: Rising oil prices usually help the Energy sector, but not this time. This may reflect a further ESG-related derating and dividend cuts.

One Relationship That Still Holds: A weak USD is still positive for EM equities. Given that USD is expected to go lower, Citi analysts are overweight on the region.