Export-oriented companies are best placed to profit from the devaluation of the euro versus other world currencies, so that’s where fund buyers in Frankfurt are especially looking to increase their allocation to, they told our researcher when he met them in February.
The interviewees also widely believed in the positive influence of the expansionary monetary policy by their fellow Frankfurters of the ECB on the European economy, a testimony that German investors do not quite share the scepticism of the German political mainstream when it comes to monetary experiments. They think it will not only boost equity markets, but also the economy, at least on the short term. An overwhelming 82% of them have a positive macroeconomic outlook, almost twice as many as in the beginning of December.
Dollar strength bites
So while Europe looks to be the winner of global currency turmoil so far, US equities risk losing out. Even before the dollar started its impressive climb last August (having appreciated by almost 20% to the euro since then), American stocks were already looking pretty expensive. While none of interviewees expect a Fed rate rise to happen in the US this year (something which could send the dollar even higher), US equities are the only asset class with a substantial number of sellers among German fund selectors.
While most hold their allocation stable, one in four plan to decrease exposure. Moreover, never before have there been as little US equity buyers as now: just 18%. It shows we are going through extraordinary times if the world’s best performing developed economy is also the least-loved with investors.