Draghi Spurs Bulls to Ditch U.S. Equities for Europe: Options
By Inyoung HwangSofia and Horta E Costa
(Bloomberg) — Equity investors are switching their allegiance to Mario Draghi from Janet Yellen.
Anticipation of more stimulus from the European Central Bank triggered a record amount of money into an exchange-traded fund that tracks the region?s stocks while hedging against currency moves. The Stoxx Europe 600 Index posted its best January since 1989, while the Standard & Poor?s 500 Index had its worst month in a year, with traders pulling more money than ever before from an ETF tracking it.
Optimism that the ECB will shower the financial system with cash has offset a rise in volatility stemming from a new Greek government and the Swiss National Bank?s surprise decision to scrap its currency cap. Now, after lagging behind U.S. shares for six years, it?s time for European equities to outperform, according to Michael Kapler of Mittelbrandenburgische Sparkasse.
?This is just the start,? said Kapler, a portfolio manager at the bank in Potsdam, Germany. ?Europe has huge central-bank stimulus, the weak euro, lower valuations and solid earnings growth all working in its favor. You don?t really need too much more than that for a significant rotation into Europe in the next months, even with some periods of political risk.?
ECB President Draghi announced a $1.1 trillion ($1.2 trillion) asset-purchase program just three months after the Federal Reserve stopped a similar policy known as quantitative easing. Further weighing on U.S. stocks is the likelihood that the Fed will lift interest rates in 2015, Kapler said.
The Stoxx 600 fell 0.6 percent at 3:13 p.m. in London, while the S&P 500 lost 0.5 percent.
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