Stock market exuberance is here to stay, Credit Suisse says. Here’s why investors can be positive

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“Bullish sentiment is high but at these levels markets continue to rise two-thirds of the time over the next month and we think the bullish sentiment is not reflected in retail or institutional position.'

After a volatile first week of 2021, the second week of the year has started in a slightly calmer fashion.

However, in our call of the day, Credit Suisse strategists said the exuberance was likely to continue, raising their target for global stocks and the S&P 500 SPX, -0.49%. The investment bank’s analysts, led by Andrew Garthwaite, raised their end-year MSCI World Ex-U.S. target from 362 to 375, giving a 12.3% potential return from here. They said it was in line with the bank’s U.S. strategists, who raised the year-end S&P 500 target to 4,200.

The strategists’ only worry was that 80% of stocks currently sit above their 200-day moving average, which would typically see markets fall two-thirds of the time over the next month. However, they said: “But in the very early cycle, as we are, this is not a short-term sell signal.Beyond the near term, there were a number of strategic reasons to stay positive, they said, including “ultraloose” policy and an additional U.S. fiscal boost of close to 2% of gross domestic product.

The markets U.S. stocks fell at the open on Monday, after closing at fresh all-time highs on Friday. European stocks also fell, as investors assessed surging COVID-19 cases and tough lockdowns across the continent. Bond yields TMUBMUSD10Y, 1.131% rose on concerns the Federal Reserve will be less interested in maintaining the rate of its purchases of them.

Shares in Eli Lilly LLY, +12.42% jumped more than 12% after the U.S. drugmaker said its experimental Alzheimer’s disease drug helped slow the decline of cognition and daily function in patients with early forms of the disease.

 

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