While investor sentiments remain weak with even optimistic watchers calling for more patience, Credit Suisse’s John Woods believes that the market has become too pessimistic which has created opportunities from mispriced assets.
In the midst of a challenging backdrop for global markets – inflationary pressures, recession risk, geopolitical tensions and more – Credit Suisse believes that there is still upside in equity markets, particularly due to the overwhelming pessimism expressed by investors. According to the bank’s APAC CIO John Woods, the S&P 500’s performance this year is highly unwarranted.
«What the market is telling you now is that this is the worst set of circumstances, as reflected in pricing, we’ve seen pretty much since the war. And we think that’s wrong,» Woods said in a recent webinar attended by finews.asia.
«We think the market has become a little inconsistent and irrational in its pricing. We don’t think that underlying conditions are anywhere close to the challenges we faced in the Covid pandemic and the global financial crisis.»
China Optimism
One particular market that many banks are eyeing for reentry is China with many calling for more patience. Credit Suisse has been overweight on China since the end of March and it feels that this is another market where investors have demonstrated too much pessimism.
«China is facing the most serious set of challenges in a generation. Zero-Covid, disruption to supply chains and the property sector are all combining to represent fronts in a perfect storm. And as a consequence the government is being encouraged, if not forced, to stimulate the economy to a slightly extraordinary degree,» he said with the bank forecasting fiscal stimulus equivalent to around 10-12 percent of GDP.
Despite its optimism, the bank acknowledges there are still scenarios that could derail its view. The greatest risk it is monitoring is the potential for lockdown measures to return in mainland China from a reemergence of Covid cases.
