Saxo asset allocation turns Outright Bullish

The model has turned “Outright Bullish” – meaning that the improvement in business activity is broad and clear. It has to be admitted, though, that it happens from a very low starting point.

The asset allocation has increased dramatically towards commodities (45%) and decreased exposure to stocks (30% MSCI World and 5% MSCI EM). Now only 20% capital in Bonds. Return for October was -0.44% due primarily to the exposure to stocks.

Please note that the model is completely mechanistic and based on the usual performance of the different asset classes in various economic environments.

My personal opinion is that the exposure towards risky assets (stocks and commodities) is a bit too aggressive, but if the USD is continuing lower (a currency quite hated by the model), a large exposure to commodities would make a lot of sense. On that note, I think that it is interesting that the CRB Index in EUR terms is only up around 20% since the multi-year low at year-end 2008, while most other risky asset classes have recouped as much as 50% or even 80% of their losses since their 2007/2008 highs.

In other words, commodities might be a decent bet!