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Director’s Cut
Bond sell-off bullish for equities
The sell-off in bonds is a bullish sign for equity returns in coming months. The
yield on US 10 year Treasury bonds is now up nearly 70bps from the recent low,
and in the face of the Fed’s “operation twist” that’s a strong move.
Europe’s bailout package was a positive catalyst, but with the market already
discounting good news, the latest “risk on” move is likely the result of data
showing the US economy is not going to double dip. This means the data we
were seeing a few months ago was the result of a mid-cycle slowdown coupled
with one-off supply disruptions. Importantly, real US GDP is finally above its prerecession
peak, led by higher net exports and consumer spending.
With the S&P 500 risk premium still more than 2 standard deviations above the
long term average, the bond-sell off and better than expected US growth are a
clear signal for money managers to shift from bonds to equities. If the economic
data remains strong we are also likely to see an improvement in analyst earnings
revisions in coming months, which would also be bullish for stocks.
Given the more positive environment for equities, Andrew Root’s publication of
a Macquarie Marquee conviction buy list of 16 US stocks looks well timed. With
a focus on quality growth and large caps, Andrew expects tech and financial
stocks to outperform in the next 6 months. In these sectors, his top buy ideas
include Google (GOOG US), Oracle (ORCL US), Altera (ALTR US), Franklin
Resources (BEN US) and ICE (ICE US).
While on Marquee ideas, Matt Nacard has put Caltex (CTX AU) on Australia’s
buy list as refinery closures could unlock significant value.
Highlights
Kevin Smithen has upgraded Sprint Nextel (S US) to Outperform on
improved risk/reward outlook due to iPhone led churn reduction.
Dr Craig Collie has initiated on Mesoblast (MSB AU) with a sell, and 40%
downside, arguing the share price has gone too far, too fast.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
Bond sell-off bullish for equities
The sell-off in bonds is a bullish sign for equity returns in coming months. The
yield on US 10 year Treasury bonds is now up nearly 70bps from the recent low,
and in the face of the Fed’s “operation twist” that’s a strong move.
Europe’s bailout package was a positive catalyst, but with the market already
discounting good news, the latest “risk on” move is likely the result of data
showing the US economy is not going to double dip. This means the data we
were seeing a few months ago was the result of a mid-cycle slowdown coupled
with one-off supply disruptions. Importantly, real US GDP is finally above its prerecession
peak, led by higher net exports and consumer spending.
With the S&P 500 risk premium still more than 2 standard deviations above the
long term average, the bond-sell off and better than expected US growth are a
clear signal for money managers to shift from bonds to equities. If the economic
data remains strong we are also likely to see an improvement in analyst earnings
revisions in coming months, which would also be bullish for stocks.
Given the more positive environment for equities, Andrew Root’s publication of
a Macquarie Marquee conviction buy list of 16 US stocks looks well timed. With
a focus on quality growth and large caps, Andrew expects tech and financial
stocks to outperform in the next 6 months. In these sectors, his top buy ideas
include Google (GOOG US), Oracle (ORCL US), Altera (ALTR US), Franklin
Resources (BEN US) and ICE (ICE US).
While on Marquee ideas, Matt Nacard has put Caltex (CTX AU) on Australia’s
buy list as refinery closures could unlock significant value.
Highlights
Kevin Smithen has upgraded Sprint Nextel (S US) to Outperform on
improved risk/reward outlook due to iPhone led churn reduction.
Dr Craig Collie has initiated on Mesoblast (MSB AU) with a sell, and 40%
downside, arguing the share price has gone too far, too fast.
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