This month we buy the index “db Brent Crude Oil booster” with 5% weight and increase the position of our Emerging market liquid Eurobond index from 10% to 15%. We sell our MSCI Emerging market short index with 10% weight. …
5.0% MSCI JAPAN TRN Index
Japan has the second highest trade surplus of all countries globally in 2010 and a high earnings growth for 2011 of 20% and for 2012 of 25% partly due to recovering earnings after the earthquake. The MSCI Japan also gives Yen exposure and thereby currency diversification outside the Euro.
5.0% Stoxx 600 Utilities TRN Index
Utilities performance has strongly suffered over the last years and we see rising chances of a recovery. Utilities earnings could benefit from rising power prices. Utilities earnings are less affected from an overall economic slow down and therefore a Utilities position can serve well as diversification.
5.0% Stoxx 600 Banks TRN Index
Reasons for our positive view include the reduced funding risks after the ECB action. This is clearly a strongly contrarian call. To underweight Banks has been consensus in 2011 Key risks to this call include an escalation of the sovereign debt crisis in Europe 5.0% S&P 500 Index Reasons for the US to outperform the Eurozone are: 1) the GDP growth gap which is expected to reach a 20 year record high of 2.8 pp in 2012E: US GDP growth 2012E of +2.3% compared to -0.5% for the Eurozone, 2) a less restrictive fiscal policy in the US, 3) better economic data recently from the US than from the Eurozone and 4) the expectation of our FX strategists that the Euro should weaken vs. the US-Dollar over the next 3 months to 1.30 and over 6 months to 1.25.
5.0% DJ EURO STOXX 50 SHORT
15.0% Emerging Markets Liquid Eurobond Index
The main reason for the buy was the attractive coupon. We clearly admit that this is a high risk investment. It offers some sort of regional diversification to our other largely developed countries exposure with the two major regional blocks Latin America and Emerging Europe.
5.0% iTRAXX Crossover 5-Year TR Index
We think the expected current default risk is too high in historical comparison. We foresee a normalisation of expected default risk in the longer term.
The inflation swap index offers protection against rising inflation without suffering from rising interest rates. A monetary policy that is too easy at the global level is driving the prices of goods, services, commodities, and assets. The uncertainty about the longer-term inflation outlook has risen substantially in the light of the rising oil and commodity prices.
15.0% Short IBOXX Euro Sovereigns Eurozone TR Index
We expect continuing rising bond yields considering the continuing peripheral stress as well as the possible downgrade of further sovereigns in Europe. The rising fiscal deficits and higher debt issuance by governments seem to be not fully reflected in bond market prices so far.
We view tail event protection such as a break-up of the euro zone as sustaining private sector demand for gold. Aside from negative real interest rates and a weak US dollar environment, we believe gold prices have also benefited from a significant rise in the US equity risk premium over the past decade. Moreover, gold can have a strong diversification effect in a portfolio as it is likely to move up if risk aversion continues to increase and equities continue to decline.
5.0% DB Brent Crude Oil Booster
Escalation of geo-political tensions in Middle East and Iran is a major risk for capital markets and we protect our portfolio against this risk. Very cold weather in Europe, escalating geopolitical tensions in Iran, and unexpected outages in Nigeria and the North Sea have tightened Brent oil market recently. We expect the oil prices to remain firm given our expectation of 2012 world GDP growth above 3%
10.0% EONIA TR Index
5.0% Fed Funds Effective Rate Total Return Index
Source: 13 February 2012: Absolute Return Index portfolio – Deutsche Bank AG
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