Peak Euphoria

Thursday, May 18th, 2017

Macron trade already stronger than Trump trade

Our portfolio has had Eurozone Equities as its #1 position since the middle of March. We now see evidence of indiscriminate buying, with investors scrambling for exposure to the benchmark and not caring about sector or country tilts. Our exposure is now at a level which has only been matched three times by any equity region since the onset of QE.

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Di-Worse-ification

Wednesday, April 5th, 2017

US buys the Eurozone for a trade, not forever.

Everybody seems to be increasing their exposure to Eurozone Equities at the same time. We agree with the trade but are cautious about some of the commentary. Eurozone investors need US equities to construct risk-efficient portfolios, but US investors do not need Eurozone equities in the same way. They do, however, need Emerging Markets.

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Europe vs Japan

Wednesday, February 8th, 2017

It’s not exactly Godzilla vs King Kong

With every passing week Eurozone and UK equities become a little bit more attractive and Japanese equities little less so. The headlines scream political risk in Europe, but that is a reason to sell government bonds in the affected countries, not international companies, which happen to be quoted there. By contrast, Japan has a bucket load of political risk in the form of President Trump and the dollar-yen exchange rate.

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Three Unrelated Ideas

Wednesday, February 1st, 2017

Energy, Spain and Small Caps

Nothing has happened to move the dial on any of our major themes; so this a time for housekeeping and some small ideas. The three we have chosen are: reducing exposure to the Energy sector, using Spanish government bonds as the safe-haven against election shocks in Europe, and increasing exposure to UK and Eurozone Small Caps.

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Mind the Gap

Wednesday, September 28th, 2016

Eurozone bullishness not matched by the US

When Eurozone investors are a lot more bullish about global equities than their US counterparts, we start to get nervous. There are structural reasons for this behaviour, but it can be a sign that a correction in equity markets is on the way.

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