Thesis Asset Management has halved its allocation to Europe in order to boost exposure to US equities.
The firm, which has also reduced its weighting to emerging markets, cites instability in Europe for this move – in particular rising interest rates and unemployment as reasons.
As a hedge to European risk, the firm is holding “certain amount” of gold to counterbalance this remaining exposure. However, it has trimmed gold exposure overall as it sees a weakening in a number of price supports for the yellow metal.
Thesis investment analyst Matt Hoggarth says: “Having coasted through a much calmer period, Europe is looking a little less stable.
“With tail risks remaining in Europe despite recent welcome action by the European Central Bank, we believe that holding a certain amount of gold remains sensible and we see risks to European equities which in aggregate no longer look cheap relative to their earnings.”
In contrast, Thesis sees recent US economic data as encouraging and as a result has increased exposure to US equities. The firm is also reviewing fund selections in the US to identify managers able to outperform the heavily research market.
Hoggarth adds: “US economic data continues to provide cause for optimism that the country’s recovery is reaching escape velocity. This, together with the Fed’s new, more cautious stance on the tapering-off of monetary stimulus gives us confidence for the prospects for US stocks and the dollar.
“The current reporting season for corporate earnings has generally been seen as positive, though there have been a few high profile casualties, especially in the technology and materials sectors.”