European tailwinds

Today is Fed day. Although no change is expected on monetary policy, the press conference after the meeting can reveal the Fed’s take on inflation, unemployment or even the possibility of a recession. One of his most important peers, the Bank of Japan, decided yesterday to leave rates unchanged as well, trapped between growing inflation and massive debt cost and a weakening currency. In Europe, inflation for the month of February has just been printed, with a better than expected YoY growth of 2.3%. The important news however, is that the German Bundestag passed the law to support the increase in government spending , which will have an impact on inflation down the road. But for the equity markets, it’s great news. In the chart below you can see the Fund Manager Survey by BoA, and nobody should be surprised on the direction of the positioning. After all, the performance of Europe vs US is public and available. What’s interesting is the magnitude of the change in US equity weights: 40 percentage points in one month. Another interesting data point from the chart: money is flowing into EM equities for the first time in years.

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