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2012 – end, bend or trend?
Long-term trends have dominated the past decade(s):
Global 30-year bond bull market
Global 10+ year equity bear market
Global 10+ year commodity bull market
Debasement of paper money (in mature markets, in particular) over ten years
The likelihood of these trends bending or reversing is rather limited given the fact that most
drivers are still in place:
Slowing demographics
Deleveraging of private and public households in mature markets
Increasing trade flows on a global scale (globalisation)
We therefore think that any investment stance that goes against the trends outlined above
should be taken as a tactical rather than strategic position. For 2012:
A temporary breather in the USD bear market and a normalisation of solid government bond yield
seem the most likely tactical countertrends, in our view
An important low in equities may be reached, which should open opportunities into 2013
Fixed income – conviction calls 2012
Low-investment-grade and US high-yield bonds
High credit spread but low default rate for cyclical non-financial bonds
Positive rating drift and high liquidity provisions of US companies
Convertible bonds – for risk-seeking investors
High credit spreads and upside in case of lower implied volatility
Emerging market (EM) debt
Low / negative real bond yield in mature markets = capital shift into EM
Decoupling thanks to intra-BRIC trade
Conclusions: Outlook 2012, investment
recommendations
Long-term trends are in place and reversals should be temporary – in the absence of
groundbreaking changes of financial or political systems
With lacklustre growth prospects and slowing inflation rates, the main focus will be on
politics, especially the euro crisis resolution, US elections and China transition
Risk assets are set to remain choppy. However, investors will be forced to take risks in
some ways. Our highest conviction calls for 2012 are:
Fixed Income: Corporate debt (non-financial, low-investment grade / high yield) on
balance sheet strength
Equities: Quality tilt / high and sustainable dividends on mixed outlook; China
A-shares on gradual policy easing; technical analysis: gold stocks, biotech
Commodities: Non-directional positions; earmarking cyclical metals
Currencies: Gold as risk insurance (because it is a currency); carry trade – but mind
the tactical overlay
Thematic investments: Supply response in energy, agriculturals; emerging
consumers
Wealth preservation remains key: “Do not try to be a hero”
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2012 – end, bend or trend?
Long-term trends have dominated the past decade(s):
Global 30-year bond bull market
Global 10+ year equity bear market
Global 10+ year commodity bull market
Debasement of paper money (in mature markets, in particular) over ten years
The likelihood of these trends bending or reversing is rather limited given the fact that most
drivers are still in place:
Slowing demographics
Deleveraging of private and public households in mature markets
Increasing trade flows on a global scale (globalisation)
We therefore think that any investment stance that goes against the trends outlined above
should be taken as a tactical rather than strategic position. For 2012:
A temporary breather in the USD bear market and a normalisation of solid government bond yield
seem the most likely tactical countertrends, in our view
An important low in equities may be reached, which should open opportunities into 2013
Fixed income – conviction calls 2012
Low-investment-grade and US high-yield bonds
High credit spread but low default rate for cyclical non-financial bonds
Positive rating drift and high liquidity provisions of US companies
Convertible bonds – for risk-seeking investors
High credit spreads and upside in case of lower implied volatility
Emerging market (EM) debt
Low / negative real bond yield in mature markets = capital shift into EM
Decoupling thanks to intra-BRIC trade
Conclusions: Outlook 2012, investment
recommendations
Long-term trends are in place and reversals should be temporary – in the absence of
groundbreaking changes of financial or political systems
With lacklustre growth prospects and slowing inflation rates, the main focus will be on
politics, especially the euro crisis resolution, US elections and China transition
Risk assets are set to remain choppy. However, investors will be forced to take risks in
some ways. Our highest conviction calls for 2012 are:
Fixed Income: Corporate debt (non-financial, low-investment grade / high yield) on
balance sheet strength
Equities: Quality tilt / high and sustainable dividends on mixed outlook; China
A-shares on gradual policy easing; technical analysis: gold stocks, biotech
Commodities: Non-directional positions; earmarking cyclical metals
Currencies: Gold as risk insurance (because it is a currency); carry trade – but mind
the tactical overlay
Thematic investments: Supply response in energy, agriculturals; emerging
consumers
Wealth preservation remains key: “Do not try to be a hero”
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