Investing in stocks will still be a better option than investing in bonds, at least until the end of this year, according to strategists at Raiffeisen bank.
US stocks have hit record after record highs, while European equities have also enjoyed strong performances recently.
“In our opinion, the positive conditions should remain intact,” the strategists at Raiffeisen said in a market note. “The global economy seems to be strengthening and liquidity supply is still abundant.”
Among the risks that equities face, they list the fears of tapering by the Federal Reserve (which they anticipate to begin in March) and more friction over the US fiscal situation at the beginning of next year.
Economist and author Andrew Smithers recently said that besides the Fed tapering off its quantitative easing programme, companies themselves threaten stock prices as their cash resources are falling and they will not buy back shares at the same pace as before.
In the eurozone, periphery countries are beginning to recover and only in France the situation remains challenging, according to the strategists at Raiffeisen bank.
“We maintain the mild overweighting of the equities segment at three percentage points and underweight bonds accordingly. The position on commodities remains neutral,” they said.
Their current global portfolio has 48% stocks, 42% bonds, 10% commodities.
In terms of regions, they are overweight the eurozone, US and Japan, due to the “favourable valuations” of stock markets in the single currency area, the positive outlook for Japan’s corporate sector and the fact that the US could see another possible year-end rally.
They are underweight Eastern European and Swiss equities.