Christoph Hott

“Since the summer, cyclical stocks in the US and the Eurozone have recorded a significant underperformance compared with defensive shares. Recently US cyclical stocks regained roughly one-quarter of the relative performance lost since July. In the Eurozone, cyclicals have remained depressed. The market is apparently factoring in the expectation that the expansionary monetary and fiscal policy in the US will turn the economy around and produce a strong rebound in the second half and in 2009. In Europe, the ECB is seen as continuing to concentrate on inflation risks, thus accepting a more prolonged slowdown in the economy.”