Credit Suisse: 5 signs for a V-shaped recovery of the markets

Credit Suisse Equity Strategy: We expect a V-shaped recovery ultimately and would be buyers of equities on a one-year view. We believe markets will rise 15-20% over the next 12 months, given:

Historically when we look at exogenous supply-side shocks, markets tend to rise very rapidly from the trough (SARS, Kobe earthquake, Suez, 1987). This is why 57% of the time we have entered a bear market, equities have been higher a year out (and in the case of 1966, 1982 and1987, up more than 20%). We would note that after some of these shocks (1987) the market had a double bottom over three months before the rebound;
Undervaluation of equities: clear-cut undervaluation using the ERP (8.2% versus a warranted of 6.3%) is discounting an 11% fall in earnings and ISM of 45
IG spreads are higher than the levels seen in the early 2000 and 1990 recessions. If spreads narrow, equities should rise;
We expect massive monetary and fiscal stimulus. With all central banks undershooting inflation targets and bond yields so low, we think it is only a matter of time before we get the appropriate response. This should enable a V-shaped recovery that by the end of 2021 could make up for much of 2020’s lost growth;
South Korea’s experience shows that infections can be brought under control with a limited economic hit. Large cap corporates in China are now 95% back to normal operations;

 Trader Georgi Bozhidarov

Read more:
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
WARNING: Any news, opinions, research, data or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. Varchev Finance Ltd. expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information. Varchev Finance Ltd. may provide information, quotes, references and links to or from other sites and blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the sites, blogs or other sources of information.
Varchev Finance