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Credit Suisse predicts global growth of 5.9% for 2021, says stocks to outperform other asset classes

 

Swiss investment bank Credit Suisse expects global growth to accelerate in the coming months as countries gradually reopen their economies, leading to a recovery in revenue growth and rehiring.

 

In its investment outlook for the second half of 2021, Credit Suisse predicted the world economy will grow 5.9% this year and 4% in 2022. That growth will be led by vaccine rollouts, fiscal stimulus and a broadening services recovery. It also said the United States is set to grow at a rate of 6.9% this year, the Eurozone is expected to expand by 4.2% while Asia ex-Japan is predicted to grow 7.5%.

 

Economic expansion will likely lead to a sharp recovery in global earnings growth that is set to fuel the stock market, according to Ray Farris, chief investment officer for South Asia at Credit Suisse.

 

In Asia, the bank’s preferences are Korean and Thai stocks, which can potentially benefit from the worldwide chip shortage and global reflation trends. Thai stocks are likely to also gain from a rally in oil prices.

 

Credit Suisse is neutral on Chinese equities, citing a slowdown in growth momentum post normalization from the pandemic and regulatory risks that are weighing on market sentiment.

 

Monetary policy

 

Farris pointed out in a separate media briefing that asset markets and asset prices remain supported by monetary policy in the U.S., Europe, Japan and other countries.

 

“Central banks, the core central banks, are likely to continue to expand their balance sheets, injecting more liquidity into systems, all the way through to the end of the year,” he said.

 

Inflation pressure and inflation risks have risen in recent months, according to the bank. It expects inflation to temporarily overshoot central bank targets in major economies as services sectors reopen. Persistent price pressures would encourage the U.S. Federal Reserve to withdraw monetary accommodation — in the form of monthly asset purchases to stimulate the economy — early, Credit Suisse said.

 

Farris said that he doesn’t expect the Fed to announce any decision until late third quarter and beyond, and that the actual tapering will not happen until 2022. Moreover, interest rates are likely to remain on hold until 2023.

 

“So, that’s a very supportive monetary policy backdrop for risky assets,” Farris said.