Halister News

(Bloomberg) -- The drop in equity markets earlier this year signals that the recent downgrade in U.S. economic expectations has been priced in to a certain extent already, Alain Bokobza, head of global asset allocation strategy at Societe Generale, says in phone interview.

• Slower economic growth, less policy tightening mean economic cycle could go longer, which is supportive of risky assets
• However, Bokobza sees limited upside for U.S. equities from current levels, S&P 500 should end year little changed; favors European equities, EM equities
• “We favor value style investment, and in the current environment, commodities are ’value’, oil is ’value’, emerging markets are ’value’,”: Bokobza
• Receding fears of deflation will have a huge impact on asset prices: favors inflation-protected bonds; oil vs gold; within global equities: consumer cyclicals vs consumer staples
  • Bokobza is positive on oil prices, HY credit: “given correlations, this also calls for higher equity markets”
  • Corporate credit now attractively valued vs govt bonds, also good way to hedge equity exposure
  • Spread between risk-free rates and corporate credit yields looks unjustified, given the outlook for default rates
  • ECB decision to buy IG credit from June will help boost sentiment towards in credit market
• Doesn’t think Brexit will happen, but recommends selling GBP until June 22 and overweight U.K. equities
  • “We expect the FTSE 100 to do well in the run-up to the referendum, notably supported by weakening sterling”: Bokobza

NOTE

• April 6: Henderson Global Says Don’t Run Away From European Stocks
• April 4: Investors Should Not Chase Equities Higher, JPMorgan Says
• April 4: Emerging Markets’ Headwinds ’Sharply Diminishing’: Credit Suisse