IDEA of the month: Reducing the equity weight, shorting bonds
In this index note we reduce the equity weight from 40% to 30% after the strong recent performance of the equity markets. Equity markets …….
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In this index note we increase our position in the “Short IBOXX Euro Sovereigns Eurozone TR Index” from 10% to 20%. Interest rate levels are close to long term record lows. Our economists expect interest rate levels to gradually normalize over the next years. This normalization of interest rate levels could be supported by high country debt levels, by improving economic growth or a rising inflation trend. The low interest rate levels could also lead to outflows out of the asset classes at some time which could also support a normalization trend. In addition, our scorecard remains negative on Fixed income. In this index note, we also buy the Utilities and the Banks sector with 5% each into our portfolio. Both sectors are clearly lagging behind in the equity rally over the last 12 months. We reduce the Dax weight from 20% to 10% and the weight of the Eurostoxx Select Dividend 30 Index from 20% to 10%.
Scorecard Asset classes
Equities continue to be the most attractive while all the other three asset classes appear negative on our Asset class scorecard.
Our Region Scorecard favour Europe and the US. Japan, Asia ex-Japan and Lat-Am are the least attractive regions, while EMEA appear neutral. According to our scorecard for European sectors, Insurance and Oil & Gas look the most attractive, while Autos, Chemicals and Industrial Goods & Services are the least favoured.
Scorecards Fixed income commodities and Forex
In the Fixed income segment, our scorecard supports Iboxx Sov. Eurozone 10-15 bonds the most, while EM liquid Eurobond looks the least attractive. According to our Commodity Scorecard, Natural Gas looks the most attractive while Precious metal group comprising Gold and Silver and Sugar find the least favour. Our Forex scorecard favours Euro, while the Japanese Yen looks least attractive.
Total AUM of all the European ETFs amounts to Euro 180bn. 65.1% of the AUM is focused on the equities followed by 14.2% on the debt and 14.2% on the commodities. On an aggregated basis, European ETFs, overall enjoyed inflows of Euro 2.4bn (1.4% of AUM) over the last month. Credit based ETFs added 6.8% to their AUM while Money market ETFs pared 8.8% of their AUM over the past month. Equity based ETFs managed to add 2.2% to their assets over the last month and 3.0% over the last three months. At the regional level, over the last month, ETFs focused on Emerging markets registered inflows of 6.2% of their AUM while the ETFs focuses on European Union managed inflows of 4.9% of their AUM.
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Source: Trading Ideas ETF: Ideas and Flows – Deutsche Bank AG