Europe’s macro mess is already “priced in”

The worst macro outcome is already reflected in the price of many securities, according to Stefan Keitel from Credit Suisse’s private banking arm.

Emerging ­market strength, US dollar weakness and ­markets that have priced in bad scenarios were three key themes at a recent Credit Suisse conference as the global chief ­investment officer of the bank’s ­private banking arm explained its macro and market view of the world in 2012 and beyond.

Stefan Keitel said there were signs of better times in the US, and that the European Central Bank (ECB) had more firepower if it was needed urgently.

Credit Suisse is mildly overweight shares in its balanced portfolios: “Shares are on their way back to fair value and falls are now buying ­opportunities, even though the way back [to fair value] will not be quick.”

Emerging Markets

The Swiss bank likes emerging markets – bonds, FX and shares – and is overweight UK shares on technical grounds. But it does not like low-yielding developed market debt.

Keitel said Bunds and US Treasuries are “not in a bubble, [their yields] are wholly explicable because of the macro situation we have.”

For the euro/dollar, expect a range between 125 to 130; and for Swiss franc to euro, expect 120 to 125.

Keitel added: “The market ­outlook for 2012 is only one side of the coin. For the next five to ten years, we think the real assets will have advantages over financial assets. And emerging markets are not just for 2012. They are interesting for the next years, for FX, bonds and shares.”

And what of economic growth in the ­developed world? “Growth rates will be below trend over the next years, but there will be growth. ­Businesses have balance sheets in an ­excellent position, although that does not apply to the bank sector and in ­particular European banks.

“The US has given a massive ­support to risk assets in the market by saying that rates will be lower until 2014, and we believe the present ­situation is fairly well supported.

“If you look at the data over the last days and weeks, it looks like there has been an improvement in the macro market. In the fourth quarter of 2011, inflation reached its highest point in China, and more than 70% of the businesses in the US have ­surprised recently [with earnings] on the ­positive side.”


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