Equities to struggle to make major further gains – Deutsche Bank
|Earnings estimates have been revised up on the back of Q1 2021 gains and valuations look sustainable as long as real yields remain negative. But economic recovery looks already largely priced in and rates rises will cap future valuations gains. The prospect of rising interest rates is also leading to a reassessment of sector preferences, as reported by Deutsche Bank.
Equity markets may be moving beyond a range of "peaks" and into a rather less policy supported investment landscape
“Increasing commodity and other input prices will hit firms’ profit margins if they are not able to pass them on fully to consumers. Underlying all this, there will be a sense that we are moving beyond a range of ‘peaks’ (e.g. in economic momentum, fiscal stimulus and liquidity) and into a rather less policy supported investment landscape.”
“As we have seen, a really rather good Q1 2021 earnings season only just about kept markets happy: we need more reassurance from Q2 and Q3 earnings.”
“At a style and sectoral level, market preferences are shifting back and forth as uncertainty continues. At this point, a barbell approach including both growth and selected cyclical stocks looks appropriate. Rising interest rates may dent the relative appeal of tech stocks – due to discounted future earnings – but their long-term importance remains.”
“End-June 2022 S&P 500 forecast 4,200”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.