US vs Europe allocations Mar 2015

Chasing European Equities Foreign Currency Returns

“The EMU MSCI (in euros) is up 19.0% ytd, well ahead of the 1.5% gain in the US MSCI.  Of course, this divergence has been fueled by the 12.6% ytd plunge in the euro.  The currency is down 24% from last year’s high of $1.39 to $1.06.  In US dollars, the EMU MSCI is up only 4.1% ytd, and is actually down 6.8% y/y.  As a result, there has been a rush to Eurozone ETFs that are hedged to the euro.”  “Bullishness towards European stocks has reached uncharted territory,” says a quant at Merrill Lynch.  “19% of global asset allocators are now underweight U.S. equities — the largest share since January 2008.  Allocations to equities in Japan and particularly the eurozone, by contrast, have risen sharply and many respondents say that this might just be the start of an enduring trend as major central banks around the world continue along sharply different paths.”  Meanwhile, economists at Goldman and Wells are expecting “a cut to the Fed’s growth and inflation forecasts, which could result in the first rate increase coming after the June meeting…[they] still believe a September liftoff in rates is more likely that one in June.”  Meanwhile, Rick Rieder thinks “the application of technology as a deflationary force is nowhere more apparent than in the energy industry…production has continued to grow despite the rig count having peaked more than two years ago…limited incremental investment or working capital is required, but the yield continues to drive forward.  That’s called productive disinflation, and it’s happening in many different sectors of the economy.”


WM: Market Efficiency And The Infinite Regress Of “Dumb”

Meanwhile, S&P 500 funds will be forced to buy American Airlines and sell Allergan on Monday.


WM: Relax, DIY Robo-Tax Preparation Didn’t Kill The Tax Advice Industry Either


Global: “There Are No Shadow Banks, Just A Shadow Banking System”


WM: “Bond-Market Crashes Have Actually Been Relatively Rare And Mild” Says Shiller


What: 27% Of Respondents Think You Can Get Paid To Receive Insurance From Default


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