Danske Capital recommends overweighting equities by 3 percentage points at the expense of government bonds. We increased our equity weighting on June 9th. The increase has been allocated to Emerging Market equities. Our recommended EM equity weight is thus 6 percentage points above benchmark, funded evenly by an underweight position in global government bonds and a marketcap weighted underweight in global (ex EM) equities.
Of the four main signposts we identified in order for us to reallocate to equities, three have improved and developed as expected and we thus feel comfortable exposing ourselves to equity risk yet again. The three include a reduction in systemic risk from the financial system, a
tentative stabilisation in the US housing market and a confirmation of our relatively sanguine global macro outlook.
The remaining signpost, a stabilisation in global commodity prices has not come through. That, however, is a risk we are willing to bear.
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