Developed Countries

The ECB's new stimulus measures are a sign that the ECB is now looking to provide more direct stimulus to domestic demand by supporting credit growth. The interest rate cuts, and the weaker Euro that comes with it, are over for now.

Special Report

This <i>Special Report</i> reviews all of our active recommendations, including our over/underweight country and asset allocation positions, as well as our current tactical trades.

The current uptrend in Treasury yields will be cut short once the dollar appreciates in response to an increasingly hawkish Fed. Maintain benchmark duration and add a long 2/10 barbell, short 5yr bullet trade to profit from Fed hawkishness.

Bearish sentiment, higher oil prices and Chinese policy stimulus leave room for a continued bounce in stock prices. But this rally is unlikely to prove sustainable.

Confirming indicators still do not validate the oversold rally. Fade the materials sector bounce, by selling steel down to underweight.

Special Report

The benefit of including alternative assets in a traditional portfolio is almost at an all-time high, due mostly to increased return enhancement. This is despite the growing popularity of the alternatives industry and the larger number of entrants, which have reduced alpha opportunities.

The euro stopped weakening in March 2015, which coincided with the ECB starting its asset purchases. Since then, the ECB's incremental policies have been unable to push the euro lower. The price action speaks to the resilience of the currency and indicates that a lot of bad news has been discounted.

The wide WTI - Brent differentials at the front of these respective curves will continue to incentivize crude-oil exports from the U.S. to European refiners, who tend to favor the light-sweet crude coming out of LTO plays.

A number of factors triggered our downshift from a growth over value bent to a neutral style bias in late-January. Value has outperformed growth in 80% of broad equity bear markets since 1960, and in more than half of economic recessions. While neither outcome is assured, they have become much higher probabilities as credit conditions have tightened. Sector weightings also played a role, as growth indexes have nearly quadruple the tech sector exposure as value benchmarks, and more than double the consumer discretionary exposure. We are bearish on both sectors. The incentive to bet on growth stock outperformance from current premium valuation levels continues to diminish. Overall long-term S&P 500 earnings growth expectations have been pared back aggressively of late. Reduced confidence in the secular profit outlook is a headwind for overall valuations, but particularly for growth vs. value stocks. The chart shows that momentum in the G/V ratio closely follows trends in 5-year earnings growth expectations, and the current message is that the price ratio has hit a ceiling.

Cutting through the hype that will surround policy initiatives today, the ECB is caught between a rock and a hard place. We explain why, and what it means for investors.