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Strong sales and rising earnings are among Credit Suisse’s top 10 surprising trends.
“For the past 30 years, at the beginning of each year we have seen where the problems lie in our central paradigms,” researcher Andrew Garthwaite wrote in a letter.
Here are the features:
1. The S&P 500 (SP500) (NYSEARCA:SPY) together at 4,500 vs. central expression of equity caution
“Inflation is falling above the rates to be paid and the Fed is beginning to renew confidence in its rate models, allowing for a dynamic pivot. More importantly, the bar’ A drop in inflation should be associated with a significant drop in wage growth.”
2. Japan’s rate hike ends in Q1 with BOJ rate hike in 2023 and YCC’s central forecast continuing for now.
- “The technical problems of yield control are increasing (with the BoJ holding almost 60% of the 7-to-10-year segment of the JGB market) … It may be politically motivated because of the weak yen (FXY) policies are now disappointing (as they cause inflation) and from here there is little benefit, in our view (the yen is weak enough to limit eat outside).”
3. Yen vs. US dollars (DXY) (UUP) together at 100, leading to the high level of Japanese domestic and domestic bonds of appreciation of the yen at 120
“Between March 1995 and August 1998, the yen weakened from yen/$80 to yen/$145. As the trade deal broke up with the collapse of liquidity caused by LTCM, the yen increased in the following year from yen / $ 145 to yen. / $ 100 (ie c30%). This time, the trade continues for a long time and therefore the cumulative suspension should be greater than in 1998.”
4. 10-year Treasury yield (US10Y) (TBT) (TLT) increased by 5% vs. home outlook at 3.3%
- “It is possible to end the accumulation of bonds at 5%, because: The downward push comes from Japan and Europe … US long-term inflation rates are too low … Central Bank of are pushing up their prices” and tightening supply.
5. China’s hard landing vs. home to 5.1% GDP growth
- “Risks for a Chinese crisis: China’s housing prices fall by 20%… China enters bankruptcy, inflation increases… As China opens up, it is headed for a recession of money now…Limited financial capacity to respond, knowing that the financial situation is worse than it seems and the real rates are higher.”
6. US houses fell by 20% + vs. central position is a low bar
- “Simply put, real mortgage rates show a 20% drop in home starts, which also shows a 20% drop in home prices. As shown in our fourth surprise, there is a risk that can reach 5%.
7. Italy has a funding crisis vs. media center position does not expand much
- “In fact, we can have a crisis if the EU prices are higher than expected and at the same time Italy returns to the reforms.”
8. End the war in Ukraine vs. central practice continues to be important in 2023
- “At some point, Putin may realize that Western military aid has increased with deadly weapons, a war he cannot win. By the end of 2022, Russia held c17% of Ukrainian territory, compared to c24% at the end of March. , at the height of its advance. Over time, Western training and weapons seem to increase the power of the importance of the Ukrainian army.”
9. Gold price (XAU:USD) (GLD) up to $2,500/ounce vs. Gold prices drop to $1,850
- “The Central Banks are eager to find another reserve currency. If all the central banks had less than 10% of the reserves in gold went to 10% (and some central banks have almost 80% of the reserves invested in gold), will increase gold demand 1.6 x.”
10. Fuel prices (CL1:COM) (CO1:COM) (USE) (BNO) rise to $120/barrel vs. house views at $85 for 2023 and $80 for 2024
- “How can oil go to $120? … China adds c1-1.5 mbd to demand … The risk of a large cut is revealed … Russian sanctions on oil products . .. The response of shale remains … OPEC + decides to push up the price of oil … The end of the series of reserves … The experts are still short.”
See why Wells Fargo says so equities need a breather.