Credit Suisse predicts equity rally in H2 of 2012
GLOBAL - Equity markets will remain volatile for at least the first half of the year, a report by Credit Suisse predicts.
The paper asks whether global markets will now stabilise or whether risk aversion will continue to drive market trends. According to 'European Debt Crisis in Focus: Time to De-risk Portfolios' by managing director Bob Parker, data suggest a "modest" recovery, despite concerns around the euro-zone crisis.
"While short-term risks remain in global equity markets, we believe a sustained rally will develop in the latter half of 2012, driven by a number of factors," the paper says, explaining that the factors included the unattractive money market situation, as well as the level of government bond yields.
Parker adds that from a historical perspective, equity markets appear "attractively valued", especially when compared to bonds and says downside risk for stock market exposure is low, if investing in the US and emerging markets, as valuations here already take account to the weak economic situation.
The paper speculates that for several governments, the impact of quantitative easing, as well as low economic growth and their status as a bond safe haven, will continue to depress yields.
"Should investors move back into equities and higher-risk assets, we could see yields start to increase later this year and into 2013," the paper says.
"We see several positive macroeconomic trends supporting riskier assets, such as equities, emerging markets, corporate credit and commodities," Parker says, adding, "We do recognise there are a number of risks that require close monitoring going forward, and that investor sentiment could remain depressed in the short term."
"However, we believe that risk appetite will gradually increase, with a sustained rally in the latter half of 2012. As such, investors should look to re-risk their portfolios in light of the modestly improving economic environment."