The market keeps rotating to close valuation gaps. Flows into european equities keep coming in, perhaps motivated by the possible end of the war in Ukraine. The fact that the elections in Germany took place in Sunday with somehow expected results, also eliminate uncertainty. Finally the ECB, unlike the Fed, is still, until further notice, dovish, which adds a nice tailwind to the narrative. Now, what are investors rotating from? Look at the chart below and you’ll find the most crowded trades: Tech and the Mag7, long dollar and Crypto have been massively adopted by investors and, like old habits, will likely die hard. The next Fed meeting will be on March 18th and will bring more light as to what is the official position of the Fed on inflation and rates. No cuts are expected, but we may find that hikes could be again on the table, even though a pause is what’s highly anticipated.
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