It is hard not to be more positive on risk assets than before the ECB-meeting on 5 June. However, there are other reasons to take more risk in the portfolio, such as better news on the global cycle (global PMI, positive US, Japan, China data) and investor positioning. Positioning among active investors is less concentrated than at the beginning of the year and investor sentiment is less euphoric. If we combine that with the resilience in the cyclical recovery and our expectation of further improvements in housing markets in developed markets and in corporate earnings, in our view a somewhat stronger risk-on asset allocation stance is justified.

Next to the changes in positioning, mentioned above, we have overweight positions in Eurozone peripheral equities and bonds again. In the equity sector allocation we upgraded cyclical sectors like financials (from +1 to +2) and consumer discretionary (to a small overweight). Conversely, we downgraded consumer staples (to a small underweight). 

## Staples at a price/earnings premium relative to Discretionary


Source: Datastream. ING IM (June 2014)

## Consumer Discretionary upgraded

We shifted further away from Consumer Staples into Consumer Discretionary (cars among others). This move is motivated by a number of elements. First, we think that the targeted LTRO could turn out to be positive for end-user cyclical sectors through higher credit growth. 

Second, the consumer discretionary sector has lagged the broad market and other cyclical sectors. Third, the relative earnings valuations. Year-to-date, Staples have become more expensive (see graph) and score worst-but-one on our combined valuation metrics. 

## We have become more positive on financials

We have upgraded Financials from a small to a medium overweight. The adverse impact of the negative deposit rate is in our view more than compensated by the extra liquidity provided through the targeted LTRO. These come with low conditionality, which makes the carry trade in bonds still possible and worthwhile. In fact, the targeted TLRO is at a minimum an unconditional, 2-year LTRO. 

Peripheral banks could be the main beneficiary as they benefit from the rapid reduction in peripheral bond spreads.