From FT Alphaville:
Worried about that US labour data? Concerned that a recovery in the real economy has yet to emerge?
Do not panic! And whatever you do, do not sell your equities!
At least, that’s according to analysts at Credit Suisse, led by Andrew Garthwaite.
Having directed investors to buy stocks and sell bonds last month, they are now advising them to hold on to those equities for dear life. In fact, the investment bank is ignoring the tactical indicators that would normally lead it to strategically downgrade global equities. Here’s the Credit Suisse thesis:
Tactical indicators at current levels would normally lead us to downgrade equities, but their signals are less meaningful at this stage in the cycle. A further near-term correction is possible, but we believe that the S&P 500 will be 1,100 by year-end.What “tactical indicators” might those be exactly? Just these:
■ Equity sector risk appetite is 1.6 standard deviations above normal levels. However, when it last hit this level in October 2003, equities rose another 8% over the subsequent three months. Typically, risk appetite peaks 1½ months after the peak in IP (implying November/December)...MUCH MORE
