While there is a wide spread in valuations between the individual index constituents, overall valuations look more similar to the cyclical stocks than to the stable growth segment, discounting a fall in future trend EPS.

The dividend aristocrats index is well diversified across sectors. It contains stocks both from the stable growth and from the cyclical areas. The common denominator is the quality of the companies, as defined by the historic track record of increasing dividends every year over a long-term period (generally at least 25 years).

So, while the dividend aristocrats do not have a significantly superior dividend yield relative to the market, they have a track record of increasing the dividend. In a yield-starved world, this combination of quality and dividend growth is likely to be attractive to many investors. Valuations show that this potential attraction has not yet led to excessive optimism and overvaluations. Based on this analysis, the quality theme remains a reasonable core investment.

Eoin Treacy's view The Autonomies are a theme which we have been developing for 18 months and have come to represent some of the best avenues for participation in the growth of the global consumer in our view. We define the category as those companies with a truly global presence that dominate their respective niches, possess healthy balance sheets and have strong records of dividend increases. They are necessarily drawn from both cyclical and non-cyclical sectors and the dividend aristocrats are also well represented.

The stable growth companies referred to in the above report have been among some of the best performers over the last few years but a process of mean reversion has been underway for a number since late June (Also see Comment of the Day on June 28th) . For example, O'Reilly Automotive and Monster Beverage hit accelerated peaks in late June and will need to hold in the current area if the benefit of the doubt is to be given to the medium-term upside.

From late July it became evident that the industrial sector, which had lagged for much of the last year, was beginning to show signs of renewed investor interest. (Also see Comment of the Day on August 6th). As GE and Berkshire Hathaway broke upwards and with Honeywell and 3M testing the upper side of their respective long-term ranges there is the possibility that the industrial sector may be returning to a position of relative outperformance.