PIIGS Performance Shines in 2014!

What an incredible start to 2014 from the peripheral European equity markets!

  • Portugal +8.8% ytd and +16.0% in 2013
  • Ireland +6.9% ytd and +33.6% in 2013
  • Greece +6.2% ytd and +28.1% in 2013
  • Italy +5.8% ytd and +16.6% in 2013
  • Spain +5.3% ytd and +21.4% in 2013

We believe the outperformance of the periphery is driven on continued accommodative ECB policy, and reflective of fiscal consolidation from sovereigns and an improved risk/exposure profile from the banking sector.


The macro team remains committed to our Q1 2014 macro investment theme of #GrowthDivergences in which we’ve outlined a favorable growth outlook for the Eurozone, driven by easier fundamental comparisons and given that the region’s recovery is lagging the U.S. by roughly two years. (click to review the Q1 2014 presentation and listen to the webcast).


As a continuation of our Q4 2013 Macro theme #EuroBulls we remain bullish on German equities (+25.5% in 2013) and UK equities (+14.4% in 2013), in particular, which we’ve expressed via the etfs EWG and EWU, respectively.  We currently favor a slightly overweight allocation of European equities to U.S. equities.


As a further sign that risk is abating from Europe’s once most troubled peers, the spread on both the Spanish 10YR bond and Italian 10YR to German Bunds remains ground near/below the 200bp line -- where levels stood back when Greece received its first bailout. And just this morning the Portuguese 10YR dipped below 5.0%, the first time since August 2010! 


PIIGS Performance Shines in 2014!  - ww. spreads


Matthew Hedrick


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