ass et allocation nordea private banking OECD leading indicator & OECD growth OECD leading indicator & OECD growth 15 6 4 Leading indicator, 10 5 0 -5 -10 -15 OECD leading indicator; y/y change OECD GDP, y/y change to emerging markets back to neutral. In sectors, we remain very sceptical towards consumer discretionary and energy stocks, and prefer healthcare and materials instead. Growth, 2 0 -2 -4 -6 Challenges continue After reaching their highs in late April, equity markets have turned more bearish and, at the time of writing, EURO STOXX 50 P/E ratio 20 most of them are actually trading in negative territory 18 for the year as a whole. The main reason for this poor 16 performance has been the sluggish recovery of the real 14 economies in the developed world and, in particular, the 12 weak labour market conditions that continue to persist 10 EURO STOXX 50 P/E ratio in those economies. Overall, we expect market volatility 8 6 to remain high until a sustainable recovery is confirmed. Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Dec-08 Dec-09 Jun-10 One of the key discussion topics in the markets is the austerity packages that many European countries have announced and their effect on the future growth of those economies, while another has been the weaker euro and prolonged period of low policy rates that have lent sup- port to European export-led countries. At the time of writing, we are about to enter the re- porting season for the second quarter of 2010. Earnings expectations are rather subdued and, in our opinion, there is plenty of room for positive surprises in this regard. Also, after the recent retreat in equity markets, valuations of the larger developed markets have reverted to levels that are more attractive than hitherto. We remain neutral in our equity allocation, but at the same time continue to favour a more conservative stance within our stock selection. We are reducing our overweight in US equities and gradually increasing our European allocation. We have also increased exposure The safest government bonds continue to be viewed as safe havens, and German government bond yields are trading around new all-time lows. In an environment of low-to-negative inflation, we continue to advocate the importance of such bonds in investors portfolios and have increased both our allocation to and our duration in government bonds. At the same time, we acknow- ledge that spread instruments (especially high-yield bonds), will suffer if sentiment deteriorates further, and we are consequently keeping a watchful eye on the corporate bond market. In the foreign exchanges, the euro has recovered so- mewhat after plummeting to 1.19 against the US dollar in early June. Nevertheless, we have reinstated a 10 overweight in the US dollar. Elsewhere, we have taken profits from our overweight in British pounds. Recommended asset allocation at the time of the writing (5 July 2010): Equities: neutral Fixed income: overweight Cash: underweight US equities: slight overweight European equities: slight underweight Emerging markets: neutral recommended asset allocation 99 00 01 02 03 04 06 07 08 09 EUR/share 05 10 balanced portfolio equities bonds cash aggressive portfolio equities bonds cash conservative portfolio equities bonds cash current neutral 50 45 5 75 22.5 2.5 25 55 20 50 40 10 75 20 5 25 50 25 Issued by Nordea Bank S.A., 562 rue de Neudorf, L-2220 Luxembourg, phone +352 43 88 71 and has been approved by Nordea A/S, a member of SFA. For further copies of this, contact Marketing Dept, ext 287. This document is for information purposes only. In no circumstances should it be considered as an offer to sell or a solicitation of any offer to buy the securities mentioned in it. The recom- mendations may not be suitable for all recipients of this document and, accordingly, advice should be sought from your investment adviser. The information in this document has been obtained from sources believed reliable, but Nordea Bank S.A. cannot guarantee its correctness. Any company in the Nordea Group may have long or short positions in the securities mentioned, or in derivative instru- ments based on these securities. It is possible that individual employees of any company in the Nordea Group may disagree with the recommendations or opinions in this document. Where this newsletter is issued in the United Kingdom, we are obliged to inform you that, should you transact your investment business with an overseas investment firm, all or most of the protections provided by the United Kingdom regulatory system do not apply and compensation under the Investors Compensation Scheme will not be available. You should be aware that if an investment is denominated in a currency other than the currency of your residing country, changes in rates of exchange may have an adverse effect on the value, price or income of the investment. Nordea Bank S.A. R.C.S. Luxembourg no. B 14157 nordea private banking / strategy Monthly / July 2010 / page 5
INTERNATIONAL private banking Strategy Monthly july 2010 Asset allocation: equities neutral; bonds over- weight; cash underweight. US dollar overweight; funding recommendation for euro-based investors: 100 euro. Bonds: neutral on government bonds (from under- weight), corporate bonds (from overwe
Leading in -5 -10 -15 99 00 01 02 03 04 06 07 08 09 OECD leading indicator; y/y change OECD GDP, y/y change -2 -4 -6 stock mar ket 05 10 Growt 0 0 EURO STOXX 50 P/E ratio EURO STOXX 50 P/E ratio 20 18 EUR/share and the market has reversed back into a positive trend relatively soon. Weak macro pictur
11 16 10 15 Jan-03 14 13 12 11 10 P/E Jan-05 Dec-06 Dec-08 May-10 S&P 500, 12 month forward P/E Jan-03 6 5 4 3 2 1 0 6 5 4 i nte r e st rate s an d bon d yi e ld s Jan-05 Dec-06 Central Bank rates Dec-08 May-10 Central Bank rates Central Bank rates ECB rate BoE rate Fed rate neutral to overweight.
EUR/USD development 1.7 1.6 1.5 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 1.4 1.3 1.2 1.1 EUR/USD cu r r e ncy EUR/USD EUR/USD development nordea private banking EUR/USD development EUR/USD development 1 1.7 Jan-04 1.6 1.5 Jan-05 EUR/USD Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 1.4 Jan-04 1.3 1.2 1.1 1 12.00 Jan-04 1
ass et allocation nordea private banking OECD leading indicator & OECD growth OECD leading indicator & OECD growth 15 6 4 Leading indicator, 10 5 0 -5 -10 -15 OECD leading indicator; y/y change OECD GDP, y/y change to emerging markets back to neutral. In sectors, we remain very sceptical towards co
