ABN AMRO’s policy has shifted toward more European and industrial equities, at the expense of the US and the energy sector. This decision lends a more cyclical note to the bank’s equity position, which overall remains moderately overweight. The changes in sector and region are driven principally by the encouraging worldwide economic situation, the stronger improvements in European profit forecasts and the favourable valuations. These details and other information are described in today’s equities report ‘Stronger emphasis on cyclical equities’.
‘A look at share prices over the past few weeks shows that the US markets have reached all-time highs and that the annual records in Europe have improved. At the same time, profits in Europe are projected to grow more than expected. With US equities having become more expensive, we see opportunities in the increased difference in valuation with Europe,’ explains Ben Steinebach. Steinebach is Head of Investment Strategy at ABN AMRO MeesPierson, ABN AMRO’s private bank in the Netherlands.
In recent weeks the news in Europe has been dominated by the various elections. According to Steinebach, these reports conceal an improvement in the underlying situation, with companies’ profits growing. He also believes that, while the new US President will need more time for his healthcare and tax plans, the political risks in Europe are gradually diminishing. Annemijn Fokkelman, Head of Securities Investments at ABN AMRO, adds, ‘All things considered, we feel that it’s better to sell some US equities now and invest the proceeds in Europe.’
In sector terms ABN AMRO has adopted a more cyclical position by including more industrial equities. Fokkelman continues, ‘Despite having underperformed slightly this year, industry is set to profit most from the current upward trend in the investment cycle. At the same time we’re realising some of our profits in the energy sector. That sector performed well last year, but overcapacity and falling prices could put it under pressure now.’