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

Associate


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more