The global sell-off in stock markets earlier this year has made some investors nervous that the bull run is ending, but Credit Suisse said that time has yet to come.
The Swiss banking giant has been adding stocks to its portfolio and still has an “overweight” position on the asset class, global chief investment officer Michael Strobaek said Tuesday.
“We’ve bought equities and feel very well about it,” he said at the Credit Suisse Asian Investment Conference in Hong Kong. “We don’t see the end of this bull market as yet.”
The bank favored eurozone and emerging markets stocks the most, Strobaek said, as well as the energy, financials, information technology and telecommunications sectors. The least favored markets were the U.S. and Canada, as well as the consumer staples sector, he added.
Strobaek noted that markets were rattled by several geopolitical events in the past, such as Brexit and Donald Trump winning the 2016 U.S. presidential election. All those incidents were opportunities to enter the market — and he thinks “we’re still in that environment.”
Earlier this year, fears that inflation could accelerate spooked investors and wiped out the year’s gains just weeks into 2018. But that’s not a signal that the end of the bull is near, Strobaek said.
While the bull is indeed “ageing,” there’s still factors that are positive for stocks, added Credit Suisse’s head of global equity strategy, Andrew Garthwaite.
Meanwhile, the breadth of global growth is helping company earnings, Garthwaite wrote in a Wednesday note. He added that he is expecting earnings-per-share to grow 10 percent in Europe and 17 percent in the U.S. this year.
In addition, monetary conditions are still accommodative even though the Federal Reserve is looking to hike interest rates, he said.
And in an environment where inflation is rising, investing in stocks can be a good hedge, Garthwaite said in a presentation on Tuesday.
“Remember that equities are an inflation hedge and bonds are a deflation hedge until inflation rises above 3 percent,” Garthwaite said. When that happens, “something of an asset allocation shift” could occur, he added.
— With assistance by Yen Nee Lee