LEH upped their global asset allocation in stocks yesterday and today GS has cut their European equity allocation to underweight from neutral while at the same time upping their US equity allocation. These 2 firms have a
pretty big following in asset allocation circles.
more on Europe:
------The euro is underwater against the dollar this morning, and while no one else is really talking about it, Goldman Sachs has decided to cut its European equity allocation to underweight from neutral, while raising its exposure in US equities. Here we can pretty much kill two birds with one stone. The lack of structural reform in the zone, which was highlighted earlier this morning by the Fed's Poole, is expected to steer the more significant reflationary flows away from Europe. Of course, the whole idea of global reflation has been on the backburner with the hawkishness of the ECB.
This brings us to our other concern when it comes to Europe. The central bank's reluctance to shift its focus away from what has largely been energy-induced inflation and towards growth has not only prevented Europe from picking up some of the slack in the global economy left by the US, but has also wreaked havoc on the insulation card that has been flaunted by officialdom. While we have been screaming at the top of our lungs that the ECB needs to loosen up, and fast, we still do not expect a rate cut this week.
Yes, central bank officials have toned down their inflation rhetoric, but their comments continue to suggest a "wait and see" approach. In addition, the bank is not only obsessed with inflation, but also with credibility, particularly with a currency that has been keen to demonstrate the law of gravity since its inception. With EU politicians and now both the IMF and the OECD applying the pressure for European rate cuts, the ECB seems likely to assert its independence, as it has been particularly quick to hype the fact that price stability, not growth is its mandate. ----------- |
