Strategic trade
Trade view / 29 April 2015 at 9:56 GMT

#SaxoStrats: Long USA, short Europe

Head of Equity Strategy / Saxo Bank
Denmark
Instrument: SP500.I
Price target:
Market price:
Background

The 12-month price-to-earnings ratio between US and European equities has collapsed to 2.1%, down from an average of 18.1% in 2006-2011. Our view is that US equities should trade at a premium due to higher profitability, better visibility, higher growth, etc.

For this reason, we are looking to short Eurozone equities via the db x-trackers Stoxx Europe 600 UCITS ETF (DX2X:xetr) while going long on the S&P 500 (SP500.I).

We will hedge our FX exposure by purchasing EURUSD (three-month forward rate) in an amount equal to the euro value of one leg.*

(* Note that is only necessary if the short STOXX 600 position is in the cash instrument. When it is in the CFD, it is not.)

Management and risk description

Key risks include the deterioration of US fundamentals relative to their European counterparts.

S&P 500 vs. STOXX 600
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Parameters

Entry: Sell 26 units of the ETF (DX2X:xetr) for every one long S&P 500 (SP500.I).

— Edited by Michael McKenna

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Non-independent investment research disclaimer applies. Read more
4y
Simon Nulty Simon Nulty
I thought SAXO was bullish on EZ with confluence of depreciating EUR boosting exports and QE. Has this position changed? Are you still expecting 40-60% upside in 2015?

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