{"id":536497,"date":"2010-04-21T05:23:17","date_gmt":"2010-04-21T09:23:17","guid":{"rendered":"http:\/\/www.businessinsider.com\/credit-suisse-next-stop-sp-1270-2010-4"},"modified":"2010-04-21T05:23:17","modified_gmt":"2010-04-21T09:23:17","slug":"credit-suisse-next-stop-sp-1270","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/536497","title":{"rendered":"Credit Suisse: Next Stop, S&P 1270"},"content":{"rendered":"

(This guest post previously appeared at the author’s blog<\/a>)<\/em><\/p>\n

Credit Suisse recently upgraded their full year outlook on the back of stronger economic conditions.  They no longer see risks of a second half double dip (see here)<\/a> and now believe the S&P 500 will reach 1,270 by year-end<\/a>.  Their mid-year target is still S&P 1,220.   Their upgraded outlook is based on 5 factors:<\/p>\n

\n

<\/strong>1)  We still expect GDP growth to surprise positively (41\/2% global GDP growth this year)<\/p>\n

2) Corporates are under-invested (if corporate FCF normalises investment could rise by 32%)<\/p>\n

3)  Aggregate labour income looks set to surprise positively (as corporates have over-shed labour)<\/p>\n

4) China should have a soft landing (economic overheating is limited<\/p>\n

5) Fiscal\/monetary policy is still loose and the impact of a property-price decline looks manageable).<\/p>\n<\/blockquote>\n

In addition, they say equities are still attractive compared to other asset classes and most investors are caught underweight equities:<\/p>\n

“Equities still offer value relative to other asset classes. The equity risk premium is 5%. Our long-standing target (based on ISM and credit spreads) has been 4.5% (implying a 9% return), but if credit spreads stay unchanged, the ERP could fall to 4.1%. Equities also hedge investors against the two risks that we are most concerned about longer term: inflation and sovereign credit risk.<\/p>\n

Mis-positioning: Pension funds and insurance companies still have abnormally low equity weightings. Since March 2009, retail investors have sold $82bn of equity and bought $93bn of bonds, and have just started to buy.”<\/p>\n

The disconnect between credit and equity has widened as the economy has improved.  Credit markets are back to levels where equities were at 1,335:<\/p>\n

“The major macro and credit variables are back to levels when the S&P 500 was last at 1,335.”<\/p>\n

Most importantly, CS says the new bear market is unlikely to begin in 2010.  They now expect the bear market to begin in mid-2011:<\/p>\n

“We postpone our expectation for the start of a new bear market to mid-2011E from end-2010E. We still believe that the big problem is $6.5trn of excess leverage, but this becomes an issue, in our opinion, only when we get a rebound in demand for private credit. This is unlikely to occur until mid-2011E as tighter bank regulations postpone a rebound in lending.”<\/p>\n

Source: CS<\/p>\n

Read more market commentary at The Pragmatic Capitalist ><\/a><\/strong><\/p>\n

Join the conversation about this story »<\/a><\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

(This guest post previously appeared at the author’s blog) Credit Suisse recently upgraded their full year outlook on the back of stronger economic conditions.  They no longer see risks of a second half double dip (see here) and now believe the S&P 500 will reach 1,270 by year-end.  Their mid-year target is still S&P 1,220.   […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-536497","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/536497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=536497"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/536497\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=536497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=536497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=536497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}