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In a note to clients, analysts at Credit Suisse (CS) said they still expect 5% upside for the key global markets, but “advise selling developed markets into the rally rather than continuing to build positions.” 

The S&P 500 ( ^GSPC[1]) is up 4.4% so far in 2019 and 11.3% since its Christmas Eve low. Credit Suisse sees more upside ahead, largely amid the activation of the Fed’s auto-pilot.

“We think the Fed remains highly data-dependent, limiting the risks of a hard landing. Historically, a Fed tightening pause has seen equities rise by 13% over the subsequent 6 months (though admittedly prior pauses in tightening have come earlier in the cycle),” they wrote.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Jan. 14, 2019. U.S. stocks declined as weak Chinese trade data spurred concerns about slowing global growth. Photographer: Michael Nagle/Bloomberg via Getty Images

In two separate public speeches in January, Fed Chair Jerome Powell walked back some of the hawkish comments he made in December and insisted the Fed will be flexible when it comes to monetary policy.

As for why investors should sell into strength, Credit Suisse cites a few reasons, including worrisome trends in earnings revisions.

“They have been very closely correlated to global PMIs. We see European PMIs recovering post Q1 (but a de-stock is required), but have yet to see meaningful policy steps to support Chinese demand,” analysts wrote.

Credit Suisse said the recent rise in wages is set to crimp corporate margins. “A 4.5% unemployment is required to alleviate this (and...

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