Prefer defensive asset classes

Prefer defensive asset classesPrefer defensive asset classes

Deutsche Bank – Synthetic Equity & Index Strategy – Global
The Flow Whisperer – TAARSS says prefer defensive asset classes in February
02 February 2016 (22 pages/ 849 kb)

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Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update

Top recommendations for February: US Treasuries, Gold, High Grade Credit, and US Utilities.

Massive flight to safety during January suggests global equity headwinds to continue in February

ETF flow trends suggest that investors dumped equities in favor of safe haven assets such as US Treasuries and Gold during January (Figure 1). The trends of all of our main equity rotation strategies (markets, regions, US sizes) turned negative at the same time for the first time since August 2011 when markets were experiencing volatility due to the Greek crisis. Furthermore, we have only seen all global equity rotation trends (i.e. markets and regions) turn negative in four occasions since 2007, with each of those occasions being followed by a weak month for global equities recording losses between 3% and 10%.

Tactical positioning for February based on TAARSS

For Global Equities we recommend to avoid them altogether (particularly EM), or prefer DM ex US (mainly Europe and Asia Pacific) exposures.

  • For US equity prefer a sector approach. We favor Utilities and Telecom for February. We highlight Energy as a possible recovery trade.
  • For Intl DM equities prefer global regional allocations (e.g. EAFE-like) instead of other sub regions or country exposures.
  • For EM equities we see weakness across the board and recommend steering away from them in February.
  • In Fixed Income, prefer US Treasuries and IG credit over HY credit. And in Commodities, prefer Gold.

TAARSS says prefer Global Equities and Short-term bonds in Q3

TAARSS says prefer Global Equities and Short-term bonds in Q3

TAARSS says prefer Global Equities and Short-term bonds in Q3

Deutsche Bank – Synthetic Equity & Index Strategy – Global
The Flow Whisperer – TAARSS says prefer Global Equities and Short-term bonds in Q3

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Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update

Top recommendations for July: Japan, Europe, US Commercial Banks, and US Healthcare.

Market review

Global equities and bonds were under pressure during June. Global equities (ACWI) and US Bonds (AGG) fell by 2.57% and 1.08%, respectively; while Commodities (DBC) advanced by 1.64%

TAARSS rotation strategy monthly and quarterly performance review

Most quarterly and monthly TAARSS strategies presented weakness across the board during Q2 and June 2015, respectively.

Tactical positioning for Q3 and July 2015 based on TAARSS

For Q3 we clearly prefer Global Equities, while staying neutral to Bonds and away from Commodities. Within Bonds we have seen a clear shortening of the duration in investors’ portfolios, therefore we recommend staying in short-term debt products this quarter.

This month in global equity markets prefer Intl DM, stay neutral to the US, and away from EM. Region wise prefer Europe and Asia Pacific, with neutral North American exposure, while staying away from Latin America. In US equities we resume the small and mid cap over large cap theme. Sector wise we see more resilience and support in Healthcare and Technology. In Intl DM countries prefer Japan. Within EM countries, we see South Korea as the only silver lightning currently. In Fixed Income and Commodities we don’t see any strong readings. See Figure 13 and Figure 14 for full allocation details.

TAARSS says prefer International DM such as Europe and Japan

TAARSS says prefer International DM such as Europe and Japan Deutsche Bank – Synthetic Equity & Index Strategy – Global

The Flow Whisperer – TAARSS says prefer International DM such as Europe and Japan

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Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update
Top recommendations for March: European equities and Germany with currency hedge, Japan, US Aerospace & Defense, and Indian equities.
Market review

Risky assets received a boost in February with Global equities (ACWI) and Commodities (DBC) rising 5.5% and 4.4%, respectively. While US bonds (AGG) lagged behind losing 0.9% on rising rates concerns.
TAARSS rotation strategy monthly performance review

Last month, monthly TAARSS strategies outperformed or were in line with their benchmarks; while quarterly rotation strategies have been mixed QTD.

Tactical positioning for March 2015 based on TAARSS

Within equities we see strong investment demand support in DM Intl, and neutral support for the US, and EM for March. Within regions prefer Europe (with FX hedge) followed in the distance by Asia Pacific, remain neutral North America, and away from Latin America. Within the US, we again prefer Small and Mid Caps over Large Caps for March, or a total market or equal weighting approach. In terms of sectors, flows suggest a rotation into Global Cyclicals (Materials, Energy) away from Domestic Cyclicals, while maintaining some Defensives (Cons. Staples, Health Care) exposures. In International DM countries we see increased investor confidence, prefer Germany (with FX hedge) or Japan. For EM equities we continue to see India with the strongest support. Among other equity themes we see good support for US Aerospace & Defense. In fixed income, signals suggest credit over rates via US Corporate Debt (HY and IG). Lastly for commodities, we continue to see some support to Energy, but remain cautious.

TAARSS says prefer a mix of Bonds and Equities in Q2

TAARSS says prefer a mix of Bonds and Equities in Q2

Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update TAARSS says prefer a mix of Bonds and Equities in Q2

Top recommendations for April: European, German, Japanese, and Indian equities, and US Intermediate IG Credit.

Market review

Risky assets were challenged again in March with Global equities (ACWI) and Commodities (DBC) retreating by 1.5% and 6.0%, respectively. While US bonds (AGG) ended slightly positive at 0.4% as rising rates concerns eased.

TAARSS rotation strategy monthly performance review

Most quarterly and monthly TAARSS strategies outperformed their respective benchmarks during Q1 and March, respectively.

Tactical positioning for Q2 and April 2015 based on TAARSS

For Q2 we recommend an almost equal mix of Bonds and Equity, while limiting Commodity to a minimum allocation. Basically markets are divided, some investors are confident on growth others are not as sanguine, therefore it should pay off to be diversified. In terms of fixed income term allocations, prefer the belly of the curve during Q2, effectively lowering duration respective to Q1.

This month in global equity markets prefer Intl DM over EM, and stay neutral to the US. Region wise prefer Europe and Asia Pacific, while staying neutral to North America, and away from Latin America. In US equities prefer Small and Mid caps, while keeping Large Caps at a minimum. Sector wise Domestic Cyclicals show the best support, especially Consumer Discretionary. Defensives are mixed with Telecom and Health Care showing support, while Utilities and Cons. Staples suggesting selling pressure. Industry wise we highlight Aerospace & Defense which continues to experience very strong support. In Intl DM countries prefer Germany and Japan. Within EM countries India continues to show strong investment demand support despite the performance setback last month; similarly Taiwan has also experienced some good support. The rest of the countries seem weak. For Fixed Income prefer credit over rates, but stay within investment grade.

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TAARSS says prefer Europe, US Defensives, & green shoots in Energy

Deutsche Bank – Synthetic Equity & Index Strategy – Global TAARSS says prefer Europe, US Defensives, & green shoots in Energy

The Flow Whisperer – TAARSS says prefer Europe, US Defensives, & green shoots in Energy

04 February 2015 (22 pages/ 751 kb)

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Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update

For February prefer European equities with currency hedge, US Defensives, US Energy equities and commodities, Gold miners, and Indian equities.

Market review

The year started tough on risky assets with Global equities (ACWI) and Commodities (DBC) down by 1.3% and 5.7%, respectively in January. While US bonds (AGG) benefited from safe haven demand and gained 2.05%.

TAARSS rotation strategy monthly performance review

Monthly TAARSS strategies underperformed and quarterly strategies outperformed their benchmarks in January. Multi Asset was up by 1.0% in Jan.

Tactical positioning for February 2015 based on TAARSS

Within equities we see new upside opportunities in DM Intl, good support for the US, and some degree of selling pressure in EM for February. Within regions we recommend to take advantage of the European support, maintain allocations to the US and Asia Pacific, and steer away from Latin America. For European exposure we see even more support in currency hedged products. Within the US, we prefer Small and Mid Caps over Large Caps for February, or a total market or equal weighting approach. In terms of sectors, Defensives (e.g. Utilities, Health Care) continue to display support; while Energy has begun to show interesting support.

However Domestic Cyclicals are losing some momentum. In International DM countries we advice caution and we still prefer a multi-country diversified exposure.

However if country exposures are desired then Germany and Japan may seem interesting – both with a currency hedge though. For EM equities we see India with the strongest support. In fixed income, signals suggest IG rates and income via US Treasuries and Municipals. Lastly for commodities, we see interesting developments of investment demand supporting Energy and Gold.