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Crisis Over, Sell Safe Haven Assets: Private Banker

Markets are sending confusing signals to investors. The risk-on trade has boosted equities and pushed money into emerging markets, but at the same time money has poured into safe haven assets like the yen and the Swiss franc.

“We would argue that the sun is about to fade on safe havens as investors begin to recognize that we are no longer in a period of crisis,” said Gregory Perdon, a senior investment director at Arbuthnot Latham & Co. said in an interview with CNBC on Thursday.

“QE (quantitative easing) has helped to distort many asset prices globally. One of the well-known side effects of QE is that certain prices can get distorted and this flies in the face of our laissez-faire capitalistic model,” he said.

“If we accept that we are slowly emerging from the crisis and returning to a state of normalcy, then we can argue that policies that encourage QE will not last forever. And when QE stops then we should witness a reversion to the mean. We believe that globally, QE is in its final stages and when these programs begin to wind down, safe haven currencies, and US government bonds, should depreciate” said Perdon.

When the market returns to normality, Perdon’s believes interest rate differentials will go against the franc and the yen as the Swiss National Bank and the Bank of Japan take a more dovish stance than the European Central Bank and Bank of England (BoE).

Intervention has also played a role in both currencies. Perdon believes this will support those who take a negative view on both the franc and the yen.

So if you sell the yen and franc what should you buy? Perdon says the pound offers a buying opportunity as the BoE raises rates and the UK economy recovers from falling growth at the end of 2010.

“Our positive position on the pound is based on the view that the British economy is improving. We are witnessing rising private consumption, improving manufacturing and industrial production numbers, rising domestic credit to the private sector, improving employment and confidence levels and also a budget deficit which is improving faster than many of its European peers,” Perdon said.