Will eurozone QE stave off deflation?

Deflationary fears drove a strong performance from the ‘gilt proxies' in 2014, but there are hopes the ECB's QE programme will help the equity markets this year.

With the likelihood of reflation in Europe increasing and US rates potentially moving up this year, we continue to keep a positive skew within the portfolio by combining selective later-cycle, larger cap ‘growth' exposure, with more cyclically-sensitive stocks.  Within the latter the focus is on consumer cyclicals and increasingly on financials, where we have been adding exposures. Supportive monetary policy, with the European Central Bank in March beginning its €60bn-a-month government bond-buying programme, should help to stave off deflation.  But there are a few signals market lead...