We take our cue from the Federal Reserve and opt to perform some risk management of our own. We are reducing our equity overweight from 8 to 5 percentage points. The key reason is that risks to our macro call, i.e. slow growth/no recession in the US, have increased over the past month as the labour market shows signs of weakness.
There is no doubt that US growth has weakened and will be weaker than we expected 6 months ago. However, we think the key questions now are:1) Which shocks have hit the US (and global)economy over the past 6 months, how severe are they and will they persist and 2) will US monetary policy work as it normally does?
Read the entire newsletter (Febr. 2008) (PDF: 360kb. 4 pages)