Tuesday, July 21, 2009

Credit Suisse says "me too!"

AlphaNinja - On the heels of yesterday's bullish S&P500 call by Goldman, Credit Suisse wants to go on the record as bullish as well.

They take their S&P500 target way up to 1050 from 920. The analysis is a little light on fundamental equity analysis, but this is from a macro strategist so that's his job.

"Credit Suisse raised its estimate for the Standard & Poor’s 500 Index by 14 percent to 1,050 by the end of the year, citing improving economic indicators and earnings.
Investors should increase holdings of global equities to “overweight” and reduce government bonds to “benchmark,” according to London-based global strategist Andrew Garthwaite.
The VIX and investment-grade corporate bond spreads have returned to more “normal levels” and this will allow money market funds to buy into the stock market, Garthwaite told clients in a note today."

Valuations on equities are “not expensive” and consensus estimates for earnings in the U.S. are now being increased, something which precedes a rising stock market in the subsequent two to three months, Garthwaite wrote.

“Bonds no longer look attractive,” he wrote. We expect “a positive macro surprise in the second half of the year. We believe that we are halfway through the first ‘V’ of an upward sloping W-shaped recovery, with a likely peak in the early fourth quarter.”

Details from Goldman's comments yesterday based on the number of companies beating and raising earnings guidance.

Goldman Sachs Group Inc. boosted its forecast for the Standard & Poor 500 Index, saying improving earnings will spur the steepest second-half rally since 1982.

“You saw company after company either raise guidance or at least guide to the higher-end of the previous range,” Kostin said in an interview today. “The early reporting companies are often interesting barometers for what’s likely to take place.”

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