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- We remain selectively long risky assets and underweight fixed income. But we have reduced overall risk and we are managing our positions more tactically. In particular, we have made these adjustments to our asset allocation over the past month:
- While we remain structurally underweight EMU bonds, we have taken advantage of yield volatility and first increased and then trimmed our underweight tactically, taking profits as German Bund yields rose.
- We closed our long Japanese equity exposure. This was an unhedged position, so the rally in equities was offset by losses from a weaker yen.
- Finally, since we have reduced risk, we have less of a need for hedges against negative global shocks, so we have closed our short EUR/JPY position.