NEW YORK, Feb 5 (Reuters) - The recent round of monetary stimulus from the Bank of Japan and the European Central Bank has increased the appeal of those regions’ stocks versus their U.S. counterparts, said Ashwin Alankar, a top strategist at Janus Capital Group Inc.
As the BoJ and ECB pump more cash and keep rates at rock bottom levels to boost their domestic economies, they have reduced the cost of insuring stock losses with options and other products, Alankar said.
The cost to insure losses on U.S. shares, on the other hand, have risen from a year ago after the Federal Reserve ended its bond purchase program last autumn, and it might raise short-term interest later this year, he added.
“History tells us: follow what the central banks want you to do. Don’t short them. Follow the imbalances. They will only get larger,” Alankar said in a telephone interview.
Last month, the ECB decided to buy 60 billion euros ($68.17 billion) a month to help a fragile euro zone economy, while the BoJ pledged to maintain a stimulative policy.
In the five weeks into 2015, so far, Alankar’s view seem on the money.
Tokyo’s Nikkei has risen 0.3 percent, while the pan-European FTSEurofirst 200 index has increased 8.7 percent. The Standard & Poor’s 500 index has edged up nearly 0.2 percent.
For U.S. investors, the strong dollar will eat into the profits from overseas stocks.
The Denver-based investment firm hired Alankar last July to head its asset allocation and risk management operations, along with Nobel prize winner Myron Scholes who will be its chief investment strategist.
Two months later, Bill Gross left PIMCO, the firm he founded, to join Janus to help expand its global macro bond strategies.
While easy monetary policies propel stock prices higher, Alankar cautioned that the reverse also holds true.
When a central bank begins to tighten policy, stock market volatility and the cost of insuring losses follow.
“When they normalize, there will be a shock,” Alankar said.
Given the recent drop in oil and other commodity prices, he warned against investing in Russia and Brazil, among other countries.
“In the equity world, you want to avoid those countries that are too commodity based,” he added. (Reporting by Richard Leong. Editing by Andre Grenon)