For the current quarter earnings have been decent but not over expectations, however, equity markets continue to surge as new money is invested in stocks and fund managers are on a “seller strike”, says a report from Citi Research analysts Tobias M Levkovich, Lorraine M Schmitt and Christina Wood.
The report also notes that there are few risks related to earnings towards the end of this fiscal and 2014.
Maverick USA was down 3.3% for the second quarter, while Maverick Levered was down 2.1%. Maverick Long Enhanced was up 8%. Year to date, Maverick USA is up 31.8%, while Maverick Levered has gained 49.3%. Maverick Long Enhanced has returned 9.9% for the first six months of the year. Maverick Capital is a long/ short Read More
Emerging equity markets losing shine
American Indexes and S&P are now preferred by investors in an attractive equity market backed by advanced economic growth potential, stronger dollar overtime, better budget deficit numbers declining risk premiums and better market liquidity. For the past few years, emerging markets were the prime spot for the asset managers, but due to underperformance in the previous years, along with exigent liquidity, managers are moving to other geographies and leaving emerging markets, which have become a low-expectation area within global equities.
United States markets look in good condition to attract the majority of new money over the next few years as there are several sources emerging.
Shale gas revolution benefiting America
There can be expected some fascinating probable results fueled by a recent press report where OPEC and Saudi Arabia discussed their concerns over North America shale technology, which can be a potential game changer. This newest driver can have some economic insinuation also, due to extreme competition of various domestic industries and the ability to find new ways to exploit these resources for transportation. There can also be some dynamic reform in the railroad and trucking industries, which may soon begin to use these new fuel sources.
The researchers point out that there are enough signals that show a bullish trend in these equity markets, and in the short term might be appropriate. However, investors will opt out for buying the stock on pullback rather than just buying it, because there are no signals as of now of price decline.
American market favorite
In 2011, Citi Research analysts forecasted a new material bull equity market regime for 2013 but investors rated this as being overly optimistic and slanted with a home market bias. However, everyone witnessed a 100 percent bounce from the 2009 March intraday low, which was contrary to the prevalent idea at that time. According to client surveys, America has emerged as the most favorable market to invest in.
There are various areas where the U.S. is gaining significant rebound, like hydraulic fracturing and deep seas drilling techniques, informational mobility via smart devices, a surge in homebuilding activity, cost efficient manufacturing, better jobs and economic growth scenario.
Citi analysts say that there are numerous reasons that call for an increase in various share prices for the next several years in equity markets. They are cautious that investors may get overly excited due to rising equity prices, but that may not be a worry for now, due to lack of bubble mentality as was witnessed in 1999.