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Credit Suisse: 4 Risks to the Rally

I’ve always liked Andrew Garthwaite’s work at Credit Suisse.  In a recent note he discussed the biggest risks to the market (via Business Insider):

“Overall, we continue to believe that equities would have a meaningful correction (i.e. 10% or more) only after one of the following events occurs:

(1) There is a clear monetary shock with interest rates rising: we think this is likely to be a mid-2015 event in the US;

(2) Equities become clearly expensive against bonds (i.e. the US 10-year bond yield rises above 3.5%);

(3) Risk appetite indicators hit euphoria;

(4) A global macro shock (the most likely candidates being a sharper-than-expected slowdown in China or political shocks in peripheral Europe).”

Garthwaite says the market might stagnate in the near-term but will be “significantly” higher in the next 6-12 months.  Also interesting to note is CitiGroups indication that equities are in the euphoria level.   Then again, complacency seems to have been a persistent trend all year and that hasn’t stopped us from marching higher.

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