Global Investing

Three snapshots for Tuesday

A good sign for UK growth – activity in Britain’s construction sector unexpectedly accelerated in March, the Markit/CIPS ¬†Purchasing Managers’ Index rising to 56.7 from February’s 54.3.

An update on cross-asset performance this year as we head into the 2nd quarter:

Equity risk premium by region:

 

The Great Switchback and the ERP?

The risk of a whiplash-inducing switchback from core AAA bonds to equity and risk — now that euro/banking systemic fears have eased and a global economic stabilisation seems to be underway — is suddenly top of most investors’ agendas.¬† Last week’s surge in U.S. Treasury, German bund and British gilt yields as global stocks caught a fresh updraft saw U.S. equity outperform bonds by almost 5 percent, according to Societe Generale. While not historically shocking in itself, SG reckons the cumulative weight of several weeks of this may well be having its impact on asset managers as the Q1 comes to an end.

Coming on the back on several weeks of equity outperformance, those remaining overweight bonds will be finding life particularly uncomfortable right now.

The question for most strategists is whether this is start of a wholesale rebasing of portfolios that could see dramatic asset allocation shifts over the coming quarters.