Economic data from the USA indicates the economy remains robust. The US economy grew recently by 3.3 percent, which is still above trend. Consumer confidence and sentiment in the industrial and services sectors have also improved of late. This means there’s currently no sign of a looming recession. The situation in Europe is rather different.
The slowdown in the region is more advanced, and is already being felt in Germany, the eurozone’s biggest economy. Sentiment in the economy also remains low by historical standards. However, the mood in industry has improved considerably of late. This is the first sign that the worst of the recession may be over. With the downturn seemingly having bottomed out, Europe, in particular, appears to have taken a step towards recovery. In response, we’re reducing our heavily underweighted position in European equities. We are maintaining a slight underweight, though, as we want to see clearer evidence that this bottoming-out process will last.