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March 26, 2024
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In the European Economic and Monetary Union, banks' holdings of sovereign debt remain in focus, not least because of the ECB accelerating the reduction of its sovereign bond portfolio this year. Quantitative tightening at a time of significant public-sector refinancing needs requires other investors to pick up the baton. Will banks resume their traditional role as anchor investors? Or will they remain reluctant to increase their holdings, as they were in 2023? Moreover, differences in the sovereign exposures across national banking sectors – especially with regard to “home bias” – have been an obstacle to completing the Banking Union with a European Deposit Insurance Scheme (EDIS), and thus continue to receive attention from policymakers. The good news, as we show in this report, is that European banks in aggregate made some progress in 2023 toward diversifying their claims on governments. [more]
March 15, 2024
In a new report by Luke Templeman and Galina Pozdnyakova they highlight how enthusiasm for AI has propelled the US tech sector forward, with the Nasdaq surging over 25% since last October, led by the ‘Magnificent 7’ stocks. However, with these stocks now compromising over a quarter of the S&P’s market capitalisation, concerns arise about potential market volatility. Diversification becomes crucial and identifying assets with negative correlation to the Mag-7 could offer stability. Sectors like utilities and financials, alongside specific stocks and treasuries, present opportunities to mitigate this risk. European markets have shown independence from the Mag-7, providing further avenues for diversification. As these tech giants face unique risk, including regulatory and geopolitical challenges, exploring options beyond Big Tech could be prudent for investors. [more]
March 13, 2024
In our latest report, we combine our research across equity factors with our latest risk optimization and drawdown mitigation techniques to generate a smart beta strategy with the same volatility as its MSCI world benchmark, but both 4% higher returns and lower drawdowns.
Our methodology can be applied to various multifactors, from traditional risk parity to machine learning, and more broadly to any long-only portfolio, such as defensive, ESG or thematic strategies.
Clients of dbResearch can access the full report on research.db.com [more]
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