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Takeaway: Adding German Equities to Investing Ideas

We are adding German Equities (EWG) to Investing Ideas today. Please see the note below from Hedgeye CEO Keith McCullough and watch a special video excerpt featuring Europe Analyst Matt Hedrick from a call held earlier this week below.

Our Europe Analyst, Matt Hedrick (German American dude) hosted a bullish Institutional Research call on Germany earlier this week and the highlights were as follows:

  • QE is only just beginning; the Euro will continue to weaken; Germany will disproportionately benefit due to exports; and asset classes like equities will inflate due to money creation (the German economy sits in the sweet spot to benefit from a weaker euro as its exports account for a monster 47% of German GDP)
  • Since the ECB announced QE on 1/22/15 the correlation between the DAX and EUR/USD is -0.84, a strong negative correlation that we expect to persist as the ECB keeps its foot on the QE pedal for longer than its intended target (late 2016)
  • Recommending long the DAX (HEWG or EWG) and short EUR/USD (FXE)