NDR Fixed Income Allocation Strategy March 2023 Update

European investors now own 15% of US stocks, whilst they have reduced EURUSD and GBPUSD hedges over the past 4 years, as any risk aversion from lower US equities has driven EURUSD lower - being underhedged counterbalances US equity returns. However, this did not work last Summer and the USD has been notably weak during the recent equity sell-off (see full discussion overleaf). With this correlation reversed, we note that European investors now find themselves underhedged their US equity exposure. It has been a volatile month for FX however the USD held key levels and recovered from the lows as US trade policy has become more measured.  The longer-term risks remain for USD, as the Administration attempts to rebalance the US economy, whilst positioning is structurally long USD. Read more →