European Equities / Common Sense / Liz Taylor

Good Morning Ladies and Gentlemen

”Put on some lipstick and pull yourself together.”

Elizabeth Taylor

In our increasingly complex world, many individuals seek simple explanations for a wide range of issues. It’s all too easy to assign blame to a single person or group for problems such as unemployment, inflation, pandemics, and other crises. However, this tendency has fueled the spread of fake news and conspiracy theories among not only the general public but also government officials. As is often the case, there are no limits; the more outlandish a conspiracy theory, the more likely it is to gain traction.

European Equities

According to the latest survey by Bank of America among global fund managers, allocations to commodities and bonds remain notably low. In January, there was a significant shift from U.S. equities to European markets, with the equity allocation for Europe experiencing the second-largest increase in the past 25 years. A net 41% of asset managers surveyed report being overweight in equities. The most commonly executed trades include long positions in the „Glorious Seven“ (53%), long U.S. dollar (27%), and long crypto (13%). The primary event risks identified are abnormally rising yields (36%), potential Fed rate hikes (31%), and the possibility of a trade war (30%). Investors perceive the most promising opportunities for a risk-on scenario in China’s growth (38%), anticipated Fed rate cuts (17%), and advances in AI productivity (16%).

Interest Rates

In the bond markets, investors are closely monitoring the first significant economic data for January, as well as key central bank meetings scheduled for next week. Following a sell-off that concluded mid-last week, yields have continued to ease. This trend reversal was prompted by encouraging inflation figures from both the UK and the United States. Additionally, the absence of surprises from U.S. political developments is contributing to this stability. Moreover, sustained pressure on oil prices since last week is further reducing inflation premiums in the interest rate markets.

Common Sense and No Surprise

I find it perplexing that some individuals, particularly journalists, label the actions of CEOs in relation to President Trump as capitulation. Four years ago, many of these same CEOs supported the Democrats, and now they are aligning with Republicans. It is noteworthy that President Trump also backed Democrats in the past before transitioning to become a Republican President. While this shift can certainly be viewed as opportunism, it could equally be interpreted as a matter of common sense. CEOs have a responsibility to their shareholders, as well as to the many employees and millions of customers they serve. As Richard Quest from CNN recently highlighted, voting trends indicate that the public, most probably including employees and customers of the companies whose CEOs just engaged with President Trump and his administration, has made their views known. Therefore, it would be both presumptuous and unwise to disregard the need to adapt to the evolving political landscape in the United States.

Journalists, Please Get Over It

Finally, Ladies and Gentlemen, I believe journalists must set aside their indignation and return to the fundamentals of reporting. This means focusing on the story at hand without being swayed by its disturbing nature. For instance, the American people have made a decision, and journalists should start exploring its consequences, like who will bear which costs, risks, etc. Ultimately, that is the essence of reporting. I believe it is crucial to steer as clear as possible of hidden biases in reporting and journalism. Something, I think, that is particularly prevalent in European media, where many journalists tend to (over-) inject personal opinions into their work, leading to an increasingly narrow corridor of opinion. Enlighted readers and viewers are most probably not concerned with those journalistic opinions. All they want is straightforward reporting. The American people have chosen a new President and government. Whether one agrees with the decision or not, it has been made. It is time to move forward. As Elizabeth Taylor gracefully advised, “put on some lipstick and pull yourself together.” And if lipstick isn’t your preference, perhaps a drink will do the trick instead.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li