Deutsche Bank – Synthetic Equity & Index Strategy – Global TAARSS says prefer US equities and US Treasuries. Tactical Asset Allocation Relative Strength Signal (TAARSS) Monthly Update
For November prefer US equities, including Large and Small Caps from domestic cyclical and defensive sectors, and US Treasuries as a risk diversifier.
October was a volatile month for the main asset classes. Global equities (ACWI) and US bonds (AGG) gained 1.21% and 1.06%, respectively. While Commodities (DBC) dropped by 3.88%.
TAARSS rotation strategy monthly performance review
TAARSS strategies and benchmarks were mostly positive in October. US Size, Market, and Commodity sector rotations were the best TAARSS strategies last month. Quarterly allocations, which suggest a diversified mix with a preference for equities and long duration in fixed income, have proved adequate both in the multi asset and fixed income duration rotations.
Tactical positioning for November 2014 based on TAARSS
Within equities we prefer US equities over EM and DM Intl in November. Overall we would prefer North America, staying away from Europe, and neutral towards Asia Pacific and Latin America when it comes to regions. Within the US, we highlight the trend in small caps and therefore we would recommend a large cap core with an increasing small cap satellite allocation. In terms of sectors, Domestic Cyclicals (e.g., Tech) continue to display support, while Defensives (e.g., Cons. Staples) support seems to be improving recently. However Global Cyclicals are turning weaker. For those that need to be in DM countries we recommend a selective approach with preference for Asia Pacific countries (e.g., Hong Kong) and away from European ones (e.g., Italy and Spain). In fixed income we prefer rates via US Treasuries as a risk diversifier, and Corp. HY, EM debt, and Munis for yield for November. Lastly for commodities, we prefer Energy and advice to stay away from Gold in November.