2013 Outlook - The talk is about equities
In the case of the DAX (30 stocks) and the CAC (40 stocks), the same observations are applicable. Apart from domestic retail and some utilities, most others have a preponderance of overseas earnings. Looking ahead to 2013, I am told that the banks, with the exception of HSBC, have too many imponderables facing them in terms of regulation and fresh capital to make them a buy for the next trading year. Also, UK banks made huge gains in 2012 — Lloyds 72%, RBS 42%, Barclays 38% and HSBC 28%. So, to crack on, may prove a bridge too far.
“Most people I have spoken to think global stock markets are the place to be and despite the dark economic storm clouds, that they could rally by between 10-15%.”
Equities, according to most market luminaries are cheap — not so much from a valuation perspective; more on a yield basis. Dividends will become increasingly important. In Europe, analysts are making exciting comments about SAP, BASF, BMW and Bayer in Germany — great exporters! It looks also as if there will be a soft landing in China and that growth could breach through the 8% threshold. In the UK, the word on the street is positive for Unilever, Reckitt Benckiser, John Wood Group, Tullow and Salamander Energy. Some believe that the energy sector will see some frenetic M&A activity with certain of the energy giants looking to add value to their businesses. Continued recovery in the US economy seems more likely and the technology sector will surely play a key role. The market expects Intel and Cisco to rally to the cause, with investors keeping an eagle eye on Apple and Google which have fallen sharply this year. I am told that we neglect Honeywell, Caterpillar and Dow Chemicals at our peril! Happy New Year!
January 2013
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