Ned Davis Research Downgrades U.S. Market to Market Weight, Upgrades Europe and Japan
Ned Davis Research analysts have downgraded the overall U.S. market to market weight, reducing the asset allocation from an overweight 58% to 54%. This move comes as analysts increase the allocations to Europe and Japan by 2% each.
According to Joseph F. Kalish, chief global macro strategist, the reduction in U.S. market exposure is due to unfavorable fundamentals and technicals, as well as a flight to safety trade that temporarily benefited U.S. bonds last week. The analysts believe that the U.S. economy remains firm with sticky inflation, while the Federal Reserve continues to raise interest rates.
The spread between the U.S. 10-Year Treasury and the 10-Year German Bund has reached 200 basis points for the first time since October, indicating a relative decline in the U.S. currency’s value against Europe. Additionally, the U.S. has been underperforming against Japan and the U.K. in recent times.
The analysts also note that inflation continues to be higher in the U.S. relative to Europe and Japan. Ned Davis Research’s current asset allocation recommendation is 65% stocks, 30% bonds, and 5% cash. They maintain an overweight position in the S&P 500 and favor small caps over large caps. Their view on growth versus value is neutral.
