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Equity Strategy


Equity Strategy Team

Charles Cara
Head of Quantitative Strategy
Philip Isherwood
Global Sector Strategist
Richard Mylles
Political Analyst
Zahra Ward-Murphy
Global Equity Strategist

Equity Strategy Research

Equity Strategy Products: Absolute Strategy Weekly, Equity Strategy Quarterly, Trade Alerts.

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Investment Strategy Weekly Update - 23rd February 2017
23 Feb 2017
: David Bowers, Zahra Ward-Murphy, Philip Isherwood, Charles Cara, Dominic White, Michael Hessel, Raphael Olszyna-Marzys, Stefano Di Domizio, Chris Turner, David McBain

Please see below for full contents

Strategic Asset Allocation: Tripwires for Regime Change
It is too early to say whether the Trump Administration represents a regime change. We are watching four key tripwires: (1) will 10yr US Treasury yields rise above 3%; (2)  is policy changing beyond America so that Global Equity Risk Premia break out of their trading ranges; (3) is there evidence of institutional change; and (4) can we identify signs of microeconomic change that support the idea of a macro regime shift?  Regime change seldom comes mid-cycle and may only become apparent coming out of the next recession.
 PODCAST: Click to hear David’s accompanying podcast

Guest article: A Letter From America, by Gerald D. Cohen: What is the Potential for US Potential Growth?
In the first of six articles written especially for ASR, Gerald Cohen, former Deputy Assistant Secretary for Macroeconomic Analysis at the U.S. Department of Treasury, examines the credibility of the Trump Administration’s claim that GDP will be 17% higher than currently forecast by the Congressional Budget Office (CBO) in 10 years’ time.

Economics, with guest article by Heinz Schulte: Stuck in the middle: EU
Political risk appears to be undermining investors’ confidence in the eurozone recovery. This week’s Economics Weekly looks at two aspects of this. First, in a guest article, Heinz Schulte examines how Germany might respond to the duel threats of President Trump and Marine Le Pen. Second, Michael has looked at the threat deriving from the Dutch election on March 15, where a political standstill could derail the Greek bailout negotiations.

Equity Strategy: French Politics Risk to Region More than Market
The risk that France leaves the Eurozone has implications for the region as a whole and is more a reason to underweight Eurozone vs Global Equities than France vs Eurozone. Within the Eurozone, based largely on our preference for Quality, we recommend being Overweight the Core markets of Germany and Netherlands vs the Periphery markets of Italy and Spain, but stay neutral on France.
 PODCAST: Click to hear Zahra’s accompanying podcast

Multi-Asset: Exploiting the Eurozone binary outlook
Euro periphery yield curve flatteners look a compelling way to hedge the elevated political risk without giving up on the robust growth implied by Eurozone PMIs. Also featuring analysis on 10-year DSLs, BTP/OAT yield spread and SEK/EUR 5y swaps.
 PODCAST: Click to hear Stefano’s accompanying podcast

• Tripwires for Regime Change, by David Bowers

• What is the Potential for US Potential Growth? by Gerald Cohen

• The shifting of Teutonic plates, by Heinz Schulte

• Dutch courage needed as Greek tensions grow, by Michael Hessel

• Absolute News: Global challenges to the EU

• Absolute Surprise: Domestic demand driving German growth

• Key Views & Forecasts

• Regional, Sector and Factor Investment Recommendations

• France is a Eurozone, not just a local, problem, by Zahra Ward-Murphy

• European bond ideas, by Stefano Di Domizio

• Sentiment extremes and markets on the move

• Multi-Asset open trade recommendations

Watch: Investment Strategy Weekly Update - 23rd February 2017
Multi-Asset Trade Alert - Hedging Euro political risk in government bonds
21 Feb 2017
: Stefano Di Domizio

The Eurozone outlook is looking increasingly binary, stuck between elevated political risks and a strengthening economic recovery. We argue yield curve flattening positions on Euro peripheral bonds offer a compelling way to hedge Eurozone tail risks without giving up on the growth story

Investment Strategy Weekly Update - 16th February 2017
16 Feb 2017
: Philip Isherwood, Zahra Ward-Murphy, Raphael Olszyna-Marzys, Michael Hessel, Dominic White, Chris Turner, Stefano Di Domizio, David McBain
Watch: Investment Strategy Weekly Update - 16th February 2017
February edition of ASR's CIO Pack
10 Feb 2017
: Charles Cara

Attached is the February edition of our CIO Pack. It summarises the macro and the market environment.  We highlight 10 charts from the ASR research team for the month.

• We believe that a Trump Administration will seek to change the fiscal-monetary mix. The expectation is for slacker fiscal, tighter money, higher real yields and a higher dollar. But the mistake may be to expect a classic Keynesian response: ultimately it is the private sector that will end up saving less and spending more.

• The consensus is that slacker fiscal and tighter monetary policy is US dollar positive. But the 1980’s template for this view neglects that then the priority for the Federal Reserve was to control inflation. We expect the dollar to decline modestly over the next year, based on real yield differentials. Trump’s goals are more likely to be delivered via a 30% decline in the USD real effective exchange rate over the next four years than by a stronger currency.

• We suspect that Trump’s initiatives will boost 2018’s growth rather than 2017’s. In the short term, we could see inflation forecasts increase more than those for growth, particularly for the US. We expect business confidence to be little changed from today’s levels in 12 months.

• We do expect to see US 10yr yields to rise but not to breach 3%: that target might have to wait until trend nominal GDP growth accelerates. A trigger for higher yields might come from the ECB / BoJ curtailing their QE programmes.

• Equities are likely to tread water over the next 12 months even if they do beat bonds, with multiples capped by the unfavourable inflation-growth mix, and only modest earnings growth. Further out, Trump’s foreign policy agenda could present a real challenge to US businesses committed to long-supply chains. The sector rotation we have seen has already discounted a growth surprise that may not materialise in 2017.


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