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Although they’re still very bullish about 2011 (S&P year-end target of 1,450) Credit Suisse says the near-term could prove challenging.  They are not calling for a large correction, but expect the market to digest some of the recent gains.  They are reducing their overweight equity position.  The four reasons they are calling for consolidation:

  • Euphoria – close to but not quite there yet
  • The Fed changing the language in the statement
  • Disappointment on an expanded EFSF or ESM
  • Raising rates/ tightening liquidity too much in Europe
  • Another rise in food prices forcing more tightening in emerging markets
  • Spare capacity in OPEC being much lower than estimated

Ultimately, however, they remain very bullish about the macro picture. They see 5 potential catalysts that will help drive the market towards their 1,450 target:

  • Ongoing recovery and rebalancing of global growth
  • Oil and food inflation falls away
  • Core Europe delivers fully the Grand Plan
  • Overheating concerns in China dissipate, as food inflation falls
  • A continued asset allocation shift into equities

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