FT’s Alphaville blog has a nice rundown of two market overview notes from UBS Securities and JP Morgan Chase today, in which both banks’ strategists are fairly optimistic stocks can hold up.
UBS’s Nick Nelson and Karen Olney state that the risks of Greece sovereign default, U.S. bank reform, and China’s fiscal policy tightening are separate and “manageable” concerns. At the same time, equity fundamentals are sound, with European equities fetching 11.5 times forward earnings, not much above last summer’s 11 times. Don’t expect cyclical stocks to have much heft, however: they’re past the “sweet spot,” the analysts write.
JP Morgan’s Mislav Matejka and Emmanuel Cau, meantime, concede that investor confidence was fragile to begin with, as shown by last week’s weakness. However, the reporting season is offering good results so far, they notice, with 197 of S&P 500 companies reporting to date and 77% of them beating EPS estimates. Plus, the credit cycle is turning. And Chinese fiscal tightening “could ultimately be seen as a positive, as a sign that growth recovery appears robust enough to allow policymakers to refocus on asset bubble concerns.”
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