ABN AMRO MeesPierson has scaled back its position in European equities

Press release -

ABN AMRO MeesPierson, the private banking arm of ABN AMRO, has scaled back its position in European equities from overweight to neutral. At the same time, it has increased its holdings in American equities, reducing the slight underweight position in these stocks. ABN AMRO MeesPierson stresses that the changes are very limited. The overweight position in emerging Asia remains intact. The bank has also made no changes to the asset allocation, remaining overweight in equities and cash and sharply underweight in bonds.

Ben Steinebach, Head of Investment Strategy at ABN AMRO MeesPierson, says: "The cyclical lag of Europe has largely been eliminated. Moreover, it recently became apparent that American companies have exceeded expectations to a greater extent than their European counterparts. In addition, there is a growing risk of a tightening of ECB policy, and Brexit is coming closer. All these factors have prompted us to reduce the overweight position in European equities to neutral and to slightly reduce the underweight position in American stocks."

Remaining alert to potential risks, but also opportunities

In the present favourable global economic climate, ABN AMRO MeesPierson is maintaining its existing overweight position in equities, though emphasises that risks will always remain. The private bank cites examples such as the possibility of rising (US) inflation or a hard landing for the Chinese economy than generally expected. Central banks could also tighten the monetary reins further. ABN AMRO believes that these risks are limited, however, and that they are unlikely all to occur simultaneously. "The current modest overweight position takes adequate account of these risks," says Steinebach, "especially after our limited profit-taking last month. We also need to remain alert to opportunities, and the present overweight in equities is therefore justified among other things by the solid macroeconomic trend, the robust corporate earnings growth and the increased but not exaggerated share valuations."

Greater benefit from favourable macroeconomic climate

ABN AMRO MeesPierson remains overweight in the more cyclical Industrials and Luxury Goods & Services sectors. It believes that these sectors stand to benefit more than average from the favourable macroeconomic climate. In addition, ABN AMRO MeesPierson remains underweight in the more defensive Telecommunications and Consumer Goods (food, beverages and tobacco) sectors. The bank has a neutral position in the other sectors.

In search of extra yield

The private bank expects to see limited rises in capital market interest rates in the year ahead. Combined with the historically low interest rates, ABN AMRO MeesPierson believes it is right to maintain the sharp underweight position in bonds in the portfolio. This underweighting applies to the full for government bonds issued in developed markets. In the rest of the bond portfolio, ABN AMRO MeesPierson consciously seeks out segments which can offer extra yield, such as government debt from emerging economies. The bank also believes it is able to generate yield returns for its clients in the corporate bond market. 

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