LONDON -- The dollar, U.S. equities and emerging market currencies like the Mexican peso should thrive in 2010 as the global economy recovers, but European equities will be pressured by a strong euro, hedge fund GLC said.
The $315 million (194 million pound) GLC Global Macro hedge fund is long on the U.S. dollar versus the euro and yen on the view that the U.S. market is better positioned for recovery, Steven Bell, who co-manages the fund, told Reuters.
It is also upbeat on the Korean won and last week took an overweight position in Taiwan as this economy also looks set to benefit from the improving global economic outlook.
GLC as a whole manages around $1.5 billion in assets. The fund gained 24.7 percent for the 12 months to September, outperforming the Global Lipper benchmark by 4.5 percent.
"We think the whole level of earnings for next year is going to be revised up," Bell said.
"With no inflation in sight, there's no reason why stock markets shouldn't continue to strengthen."
A global stocks rally -- founded on the belief the economy is recovering -- has proved bad news for the dollar since March, but Bell said the fund had now gone short on a very strong euro and, as a result, European equities.
"The strength of the euro does cast a shadow over the stock market," he said. "It has been going up, profitability has seen significant improvement but I do think the outlook for the European stock market is not as rosy for the United States."
"The U.S. has been incredibly successful in cost cutting ... and the outlook for U.S. growth is better than the outlook for European growth."
Bell also said Mexico also looked among those best placed to bounce back strongly after taking a severe hit from an epidemic of swine flu which dented tourism and hit manufacturing just as U.S. automakers GM and Chrysler were pulling operations.
"Although there are structural issues around drugs, violence and politics, the cyclical side is very strong and we expect the peso to strengthen further," Bell said.
"GDP in the third quarter could be up 10 percent for the quarter annualised. So a v-shaped recovery is more acute in Mexico than anywhere else just about."
Mexico's peso is down around 25 percent since mid-2008.
Taiwan and Korea also looked good value in Asia, he said.
"We've just gone long Taiwan versus Europe, it has a lot of positive political developments vis a vis China, the tech cycle is turning up, it's very competitive because of the weak dollar," Bell said.
"Most of our risk is in currencies where there is a good cyclical, structural or competitiveness story and Korea is the best example, it's fantastically competitive against Japan and everywhere else."
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