! We believe a progressively slower pace of EPS growth and downward pressure on P/E multiples will be the two dominant macro features of the US equity market in the second half of 2011.
! Slower EPS growth is natural at this stage of the cycle - unit labor costs are now rising rather than falling, and revenue growth appears to be moderating.
! Our expectation of lower P/E multiples is based on the view that the Federal Reserve's large scale asset purchases artificially lifted observed P/E multiples, and now that the purchase program is finished, P/E multiples will decline.
! We are hopeful that US equities finish the year with modestly positive returns, but we see symmetric risks around our 1275 year-end S&P 500 target.
! We expect "stable growth" to outperform "cyclical growth".
! Our recommended overweight sectors are health care, energy, consumer staples and telecom services. Our recommended underweight sectors are financial services, consumer discretionary and basic materials.
No comments:
Post a Comment