DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.18February2019GlobalEquityResearchInvestmentStrategyGlobalEquityStrategyResearchAnalystsAndrewGarthwaite442078836477andrew.garthwaite@credit-suisse.comRobertGriffiths442078838885robert.griffiths@credit-suisse.comNicolasWylenzek442078836480nicolas.wylenzek@credit-suisse.comMengyuanYuan442078880368mengyuan.yuan@credit-suisse.comKartikeyaUpadhyay442078882339kartikeya.upadhyay@credit-suisse.comAsimAli442078832480asim.ali@credit-suisse.comSTRATEGYEquities:DowntobenchmarkWesticktoouryear-endtargets,whichimplyc.2%upsidetoyear-endfortheMSCIACWorldindex.Wethinkweareclosetotheendofthetacticalrally,andthusbelieveinvestorsshouldbebenchmarkequitiesratherthanoverweight(inlinewithCreditSuisse'sHouseView).Whathaschangedfortheworse?■Tacticalandsentimentindicators,whichwereat15-yearlowsinDecember,arenowneutralanddiscountinganormalizationinglobalPMIs.■Historically,theS&P500hasralliedby12%,onaverage,afterde-ratingby14%in3months(asitdidinQ4)–ithasnowexceededthis.■China:ManyvariablesindicateasharprecoveryinChinaPMIsisalreadybeingpricedin.■Creditspreads:Investment-gradespreadsarenolongerattractive,especiallygiventherecorddeteriorationinquality,andIGspreadsneedtobebelow150bpsforequitiestoriseinYoYterms.■ComplacencywithrespecttotheFed:Typically,marketsriseby11%6monthsafteraFedpause(theS&PhasalreadyrisenbymorethanthissincetheFed'sU-turnon4January).WethinktheFedwillstayhighlydata-dependent,butifGDPgrowthacceleratestothelevelsdiscountedbyUScyclicals(2.5%),theFedwilllikelytighten.■Profits:USnetpositiveearningssurprisesareclosetoa4-yearlow.Wethinkthefundamentalproblemi...
