Bronze Charging Bull in New York City’s financial district.
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London — Due to the increasing number of cases of Covid-19 Soaring delta variant And with various macroeconomic changes taking place, the story of the global market has shifted from Goldielock to the fear of growth. Barclays..
In a research note on Monday, UK lenders suggested that hedging remains legitimate for investors given the swirling crowd of downside risks, but the recent sharp reversal of reflationary trading is “overkill.” Insisted.
“The combination of data no longer brings positive surprises, fast-growing evidence that supply and labor shortages can mean more tenacious inflation, China’s increasingly decisive crackdown on various industries, and The increased risk from the COVID Delta variant is consistent with enough power to give the market a fear of growth, said Emmanuel Cow, Head of European Equity Strategy at Barclays.
Mr Cow emphasized that the outlook for low growth and high inflation is causing large and somewhat volatile asset prices, and the recent dramatic decline in yields is the most obvious indicator.
“So far, stocks have held up relatively well, but this suspects a significant risk of under-the-top spins and has significantly washed away the positive returns from reflationary trading,” he said. Said.
In addition, Mr Cow added that the lack of liquidity in the summer and the mixture of messages from central banks could foster market turmoil and exacerbate rapid movements.
For the past few weeks Federal Reserve Board discusses tapering plans It predicted its quantitative easing program and two interest rate hikes in 2023, European Central Bank chose a much more dovish tone,and China’s central bank shows ready Restimulate the world’s second largest economy.
Barclays believes that it is “too early” to call the end of the cycle or to call the combination of lower growth and higher inflation “stagflation”, which requires much lower growth and much higher inflation. He said he would.
“But summer isn’t as good as vaccines, resumptions, and US fiscal stimulus are behind, and only the second-quarter earnings season is ahead as a clear catalyst for reconnecting the market with healthy fundamentals. It can be stable, “Cau said.
According to Barclays, the Covid vaccine has been successful in reducing mortality and hospitalization, but the increased predominance of delta mutants, the risk of others, and the potential impact on countries with low vaccine rates. , Continues to cloud the outlook.
Barclays analysts have been bullish on the European stock market throughout the year, but recently “stocks have become more balanced, more balanced sector / style allocations and cheaper volatility hedging. Revised the stance suggesting risk rewards for “guaranteeing”.
“Last hurray” for value, but beware first
Institutional investors’ June survey found City Investors have clearly preferred value stocks (stocks that appear to be cheaper than the company’s financial fundamentals and performance), especially European stocks, commodities and hydrocarbons.
Citi analysts said in a note on Tuesday that the “last fuss” is likely to rise in value, especially as Europe lags behind the United States and the economy continues to resume.
However, Citi’s chief U.S. equity strategist, Tobias Lefkovich, suggested that U.S. stocks rose an average of 40% between June 2020 and June 2021, requiring a review of risk and compensation. did.
“We are aware of the downside (risk) of 10%, as opposed to the potential of 1-2% profit, but many portfolio managers we discuss are increasingly bullish and qualitative. It suggests that the background is in good sync with our quantitative indicators, “Rebkovich said.
Investors also seem to be overly happy that the pre-global financial crisis equity risk premium is definitely above normal levels, but the valuation is only a low interest rate feature. “He added.
The equity risk premium measures the excess return that an investor can expect from investing in the stock market beyond a risk-free rate of return.
“ERP has fallen from last year’s highs, but accommodative central bank policies have a final cost, and investors are aware of it, so that number is still increasing,” Lebkovich said. Said.
“Furthermore, interest rate restraints mean that the Fed’s or ECB’s forecasts for lasting GDP growth are not particularly convincing.”
Wall Street analysts believe these risks are causing a “growth fear” in the global market.
Source link Wall Street analysts believe these risks are causing a “growth fear” in the global market.