Credit Suisse recently published their three key concerns for the markets. Thankfully, the list didn’t include the absurd debt debate in the USA. The key concern for US investors following this positive earnings season will be a focus again on the weak macro picture. Credit Suisse appears confident that these issues will not surprise on the downside:
“The key issues for the market remain:
- The question of whether the current weakness in macro data is a mere mid-cycle slowdown – or something more serious (we are 80% certain that it is a mid-cycle slowdown);
- The end game in Europe: we think this will include a Brady-bond-style plan (the need for the EFSF to buy secondary market debt at close to the current market price and then some European guarantee on the bonds that are issued), with the ECB willing to de facto print money in the interim (purchasing secondary market debt say in Italy and Spain if these countries fulfil certain criteria). However, there are likely to be lots of ‘interim games’.
- The degree of overheating in emerging economies globally: Emerging economies are half of global GDP (on a PPP basis). We think that the overhearing in Brazil and India is more serious than the markets realise (requiring GDP growth to slow down to 2-3% and 6% to 7% respectively) – but we find ourselves more relaxed on China (see our note 2H regional allocation, July 12, for details).”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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