DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.17January2019GlobalEquityResearchInvestmentStrategyGlobalEquityStrategyResearchAnalystsAndrewGarthwaite442078836477andrew.garthwaite@credit-suisse.comRobertGriffiths442078838885robert.griffiths@credit-suisse.comNicolasWylenzek442078836480nicolas.wylenzek@credit-suisse.comMengyuanYuan442078880368mengyuan.yuan@credit-suisse.comKartikeyaUpadhyay442078882339kartikeya.upadhyay@credit-suisse.comAsimAli442078832480asim.ali@credit-suisse.comSTRATEGYSomeupsidetogo,butsellintotherallyWesticktotheyear-endtargetspublishedinour2019OutlookinNovember,whichcurrentlypointtoaround5%upsideforthekeyglobalmarkets,butadvisesellingdevelopedmarketsintotherallyratherthancontinuingtobuildpositions.Whydowestillseenear-termupsidepotential?Tacticalindicators:OnDecember24th,ourcompositeindicatorbecamethemostdepressedsince2005.Historically,tacticalindicatorshaveralliedby1.2s.d.overthenextthreemonthsfromsuchlevels.Value:TheUSERPisnow5.9%,whilethewarrantedERPis5.2%.Stress-testingourearningsandERPmodelimpliesmarketsarediscounting1%USGDPgrowth.Theglobal(exUS)P/EandShillerPEare22%and27%belowtheiraverages,respectively.Norecessionyet:Ifhistoryisaguide,thentogetafallofmorethan20%inUSequities,arecessionisneededinthesecondhalfofthisyear;thisseemstoopessimistic.Theyieldcurvenowimpliesa23%chanceofarecessionin12months'time.Admittedly,alowerprobabilityheldaheadof3outofthelast7recessions,buteachofthesewerecatalysedbyidiosyncraticfactors.TheFedhasturnedoffthe'autopilot':WethinktheFedremainshighlydata-dependent,limitingtherisksofahardlanding.Historically,aFedtighteningpausehasseenequitiesriseb...
