瑞信-全球-股票策略-全球股市策略：风险何在？-2019.2.11-22页.pdf

Global Equity Strategy 11 February 2019 What are you saying and where are the risks DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Research Analysts Andrew Garthwaite+44 20 7883 6477 andrew.garthwaitecreditandrew.garthwaitecredit- Robert Griffiths+44 20 7883 8885 robert.griffithscreditrobert.griffithscredit- Nicolas Wylenzek+44 20 7883 6480 nicolas.wylenzekcreditnicolas.wylenzekcredit- Mengyuan Yuan+44 20 7888 0368 mengyuan.yuancreditmengyuan.yuancredit- Kartikeya Upadhyay+44 20 7888 2339 kartikeya.upadhyaycreditkartikeya.upadhyaycredit- Asim Ali+44 20 7888 2480 asim.alicreditasim.alicredit- 05101520250.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%Economists 2020 US real GDP growth estimateGlobal Equity Strategy 2 There is a lot of uncertainty if we look at the Economic Policy Uncertainty index or dispersion of earnings estimates,but the sell side is optimistic within a tight range.68%of economists believe US GDP growth will be at or above trend in 2020,88%believe equities will rise and 91%believe bond yields will rise.Is this consistent with as dovish a Fed as the markets assume?3.54.04.55.05.56.06.5201420152016201720182019S&P 500 12m fwd EPSdispersion0501001502002503003504001997 1999 2001 2003 2005 2007 2010 2012 2014 2016 2018World Economic Policy Uncertainty index02468101214Down 5%+Down 0-5%Up 0-5%Up 5-10%Up 10-15%Up 15%+Sell-side strategists end-19 price target forS&P 500,from current level of 27313/4 of sell-side strategists are forecasting positive S&P 500 returns for 2019 of more than 5%68%of economists still expect the US economy to grow at or above its long-term trend(1.8%)in 2020 Earnings dispersion is high(the variance of earnings estimates around the mean)Economic uncertainty has picked up significantly using the WEP Uncertainty Index Source:Refinitiv,the BLOOMBERG PROFESSIONAL service,Credit Suisse research -20-15-10-505101544464850525456201120122014201520172018China manufacturing PMI new orderMSCI EM rel to the world,3m change%,in dollar terms,RHS4647484950515253545520142016201720190.070.090.110.130.150.170.19European mining rel market,5 month lagChina manufacturing PMI new orders,-40%-30%-20%-10%0%10%20%30%40%-20%-10%0%10%20%30%201020122013201420152016201720182019China car sale y/y,by volumeGerman autos relative to the European market,6m/6m%change+5%Y/Y forecast from CS China autos teamGlobal Equity Strategy 3 China was,unsurprisingly,the key focus.There was a general consensus that China policy will become more aggressive and PMIs will turn around in Q2.The worry is that the stocks seem to have reflected this if we look at mining,German autos(now discounting our analysts forecasts of 5%)or emerging markets.We need to see credit growth increase and much more fiscal stimulus(which is a quarter of 2015 levels and tenth of 2008/09 levels).Mining and China PMIs have decoupled Credit growth that leads IP has yet to turn German autos are discounting an increase in China car sales EM discounting rise in China PMIs Source:Refinitiv,Credit Suisse research Global Equity Strategy 4 Interestingly,since mid-2018,the height of China complacency,all the China plays have performed by a similar amount.82879297102Jun-18Jul-18Sep-18Nov-18Jan-19European china exposed cap goodsEuropean miningGerman AutosEuropean LuxuryRel to market,since June 2018Sentiment on the China plays appears to have troughed in Q4 Source:Refinitiv,Credit Suisse research Global Equity Strategy 5 The good news is property.We think it is the key to Chinas economic outlook and the performance of developers still implies house prices rise.-40%-20%0%20%40%60%80%100%79111315171921200720082009201120122014201520172018MSCI China real estate relativeChina property transactions(floorspace),y/y%,3mma,rhs8910111213141516-1.5-1.0-0.50.00.51.01.52.02.520112012201320142015201620172019Chinese house prices,month-on-month,%chgMSCI China real estate developers rel,rhsDevelopers imply property turnover should be strong and house prices higher Source:Refinitiv,Credit Suisse research 253035404550556065707530%35%40%45%50%55%20002002200520082010201320162019Cont Europe cyclicals ex fin rel defensiveEuro area PMI manufacturing new orders,rhs202632384450566268747585951051151252008201020122013201520172019US cyclicals(ex-tech)rel defensivesUS ISM new orders,rhsGlobal Equity Strategy 6 On US recession risk,clients believe that yield curve inversion is key.A 15bp inversion(3-month versus 10-year)would result in a 33%probability of a recession compared to 23%currently and that would be at a higher level than that seen ahead of 6 out of the last 7 recessions.US cyclicals are still discounting above-trend growth(c2.5%)unlike Europe which discounts PMIs of 50(i.e.0.5%GDP growth)0%10%20%30%40%50%60%70%80%90%100%196219691976198319901997200420112019Term spread implied recession probability 12 months forward,recessions shadedDate of recession12 mth ahead6 mth aheadDec 6924%20%Nov 736%21%Jan 8032%33%Jul 81*3%74%Jul 9027%22%Mar 0115%39%Dec 0741%24%Probability of recession now*overlap with prior recession23%A term spread model of recession probabilities shows a 23%likelihood of one occurring in the next year the model has indicated higher than 23%probability of a recession 12 months out from all prior business cycle peaks,except 1973,1981 and 2001 US cyclicals appear to be discounting an elevated level of ISM new orders European cyclicals are priced for around 50 on PMIs(i.e.c0.5%GDP growth)Source:Refinitiv,Credit Suisse research Global Equity Strategy 7 There is some confusion on the outlook for capital spending:CEO business confidence has collapsed while Philly Fed corporate spending intentions have held up well.-20-10010203040-60%-40%-20%0%20%40%2005200620082009201120122014201520172019Core capital goods orders,3m/3m ann.Philly Fed capex expectations3mma,rhs-25%-20%-15%-10%-5%0%5%10%15%20%25%2030405060708019781984198919952001200620122018US CEO confidence Index(lhs,2q lead)US Capex yoy(rhs)Quarterly CEO confidence survey has collapsed The Philly Fed capex survey points to a sanguine outlook Source:Refinitiv,Credit Suisse research Global Equity Strategy 8 On markets,there is little firmly held consensus but most clients are looking to sell into the rally but have not.The sentiment indicators and our tactical indicators are getting close to neutral levels.-2.0-1.5-1.0-0.50.00.51.01.52005200720092012201420162019Indicates sentiment more extendedAggregate tactical indicator,5-yr z-scoreGreen(solid)circles indicate successful signals;red(dotted)circles unsuccessful signals-3.0-2.0-1.00.01.02.03.02010201120122013201420152016201720182019#of std devnBull/bear,Individual InvestorsAggregate tactical indicators are back at neutral levels Bull/Bear ratio for individual investors is neutral Source:Refinitiv,Credit Suisse research 024681012141991199419972000200320062009201220152018US ERP on consensus EPSUS Warranted ERP20%30%40%50%60%70%80%Q4 2005Q4 2007Q4 2009Q4 2011Q4 2013Q4 2015Q4 2017S&P 500:net positive earnings surprisesGlobal Equity Strategy 9 The main concern is that wage growth has now risen to a level that pressures profit margins.On our model the tipping point was 3.2%wage growth.We can see there is a tight labor market.Earnings revisions have been poor(and correlated to equities).Net surprises in the US are the worst since 2013.The biggest bull point is that while P/Es are neutral,the equity risk premium is high.A third of clients do not trust the equity risk premium.-75-55-35-15525456585-79%-59%-39%-19%1%21%41%61%2001200320052007200920112013201520172019Earnings breadthEquity market%change Y/Y,rhsMSCI AC World 5%10%15%20%25%30%35%40%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%1985199019962001200720122018ECI wages&salaries,%change Y/YNFIB survey:%of firms with 1 or more hard to fill jobs(3mma,rhs)The share of US firms reporting labour shortages is near a 30-year high Global earnings revisions correlate to the year-on-year change in market performance.The US ERP remains well above warranted levels Q4 2018 is one of the most disappointing earnings seasons since 2013 Source:Refinitiv,Credit Suisse research Global Equity Strategy 10 There is more complacency on credit.Net debt to EBITDA ex tech is at previous peak,the quality of IG credit has never been so low and 15%of companies by 2022 will have an interest charge greater than 30%of EBIT and thus 15%of the S&P loses some of their tax shield.11.21.41.61.822.22.42.62.819891993199720012005200920132017US net debt/EBITDA(ex financials)US net debt/EBITDA ex financials ex tech18%fall in EBITDA18%fall in EBITDANet debt to EBITDA 51.4%25%30%35%40%45%50%55%19992001200320052007200920112013201520172019US Baa as%of US IG CorporateRecord 51%of investment grade debt is just one grade above junk Source:Refinitiv,Credit Suisse research 0%10%20%30%40%50%60%Apr-15Oct-15Apr-16Oct-16Apr-17Oct-17Apr-18Oct-18Proportion of respondents who believe GEM will be the best-performing region over the next 3 months-2.0-1.5-1.0-0.50.00.51.01.5-17-12-7-238132009201120122014201520172019GEM relative to global equities,6m%chgUS 10-year TIPS yields,6m chg,rhs,inv.40%50%60%70%80%90%100%110%199719992002200520082010201320162019GEM sector-adjusted 12m fwd P/E rel Dev.WorldAverage(+/-1SD)Global Equity Strategy 11 On regions,GEM has become the biggest overweight on a 3-month view on record.GEM are becoming less cheap on sector-adjusted P/E and are discounting a fall in the TIPS yield and are discounting a recovery in China GEM as the best-performing region on 3m view GEM equities(sector adjusted)nearing the top end of their 6 year range rel.DM GEM equities discounting a fall in TIPS yield-20-15-10-505101544464850525456201120122014201520172018China manufacturing PMI new orderMSCI EM rel to the world,3m change%,in dollar terms,RHSEM discounting rise in China PMIs Source:Refinitiv,Credit Suisse 70%75%80%85%90%95%100%105%110%2003200520082011201320162019Europe ex UK sector adjusted 12m fwd P/E relative to USAverageGlobal Equity Strategy 12 On Europe,US investors have capitulated.Rising wage growth while PMIs disappoint is a bad combination.There is a debate over valuation.P/Es are cheap but not when sector adjusted(and when the P/E has been this cheap in the past,Europe has underperformed).-5,0005,00015,00025,00035,00045,00055,000Dec-14Jul-15Feb-16Sep-16Apr-17Nov-17Jun-18Jan-19Cumulative inflows in Continental European equity funds since December 1st 2014,$mBy USA InvestorsBy Ex USA InvestorsUS funds gave up on Europe 44464850525456586062-0.7-0.5-0.3-0.10.10.30.50.72013201420152016201720182019Euro area wage growth yoy pp chgEuro area PMI,rhsEuropean wages picked up as PMIs fell Continental European equities trade near the same multiple as the US,sector adjusted 65%70%75%80%85%90%95%20042006200820102012201420162019Euro area PE relative to USAverage(+/-1sd)The euro area is trading below its norm on 12m forward P/E relative to the US Source:Refinitiv,Credit Suisse research-2.0-1.5-1.0-0.50.00.51.01.52.01989199319982003200820132018*A higher z-score means cheaper valuationUKComposite Z score:P/E,P/B&DYComposite Z score all measuresGlobal Equity Strategy 13 On the UK,there have been near record outflows and the FTSE in now 18%cheap on our model(which is based on sterling,oil,GEM and lead indicators)with composite valuations hovering at 20-year lows.12.013.014.015.016.017.018.019.020.02006200820102012201420162018+1/-1 st devFTSE 100 rel to World,lc termsModel(GBPUSD,Oil price,OECD Lead Indicator,MSCI EM)Our FTSE 100 relative performance model pulls together the major macro drivers GBPUSDBrent price in GBPOECD Lead indicator-dev.from trendMSCI EM relLatest1.3146.691.55100.74Coefficent0.740.02-0.310.03t-value2.193.59-7.783.61Coefficent10.03Current FTSE rel12.19t-value10.84Suggested by model14.36Upside(downside)17.8%R20.69adj.R20.67FTSE model details -0.70%-0.60%-0.50%-0.40%-0.30%-0.20%-0.10%0.00%0.10%0.20%0.30%20032006200820102012201420162019Cumulative flows into UK equity funds as%of mcapThere has been widespread selling of UK equities UK equities are near their cheapest on our composite valuation score Source:Refinitiv,Credit Suisse research-0.3-0.2-0.10.00.10.20.3RetailingInsuranceCons DurReal estateBanksChemicalsTransportPaper prdtsComm svsTelecomsCons matTechnology HardwareFood ProducersFood RetailDiv.financialsAutomobilesCapital GoodsCons splsUtilitiesSemiconductorsBeveragesHot&LeiMet&MinSoftwarePharmaceuticalsHealthcare EquipEnergyHh prdctsUK sectors correlation with Sterling TWI,last 10yHSBCBNP ParibasSantanderINGLloydsBarclaysBBVAIntesa Soc GenAgricoleRBSDanskeSwedbankStanCSvenskaKBCDNBSEB AABN AmroNatixis0.30.50.70.91.11.31.51.71.94.56.58.510.512.514.5Major Pan European Banks by market capPrice to Book12m forward ROEGlobal Equity Strategy 14 The main debate is what to buy of the domestic sectors if there is a deal.Banks seem to be the most preferred.0.480.530.580.630.680.730.780.830.881.11.21.31.41.51.61.71.820132014201620172019GBPUSDUK banks relative,rhsCorrelation of banks with sterling UK sectors relative performance correlation with sterling Source:Refinitiv,Credit Suisse 0.250.300.350.400.450.500.550.60-0.7-0.20.30.81.31.82.32.83.33.82009201020112012201320142015201620172018201910 year bund yield(%)European banks relative(rhs)80%90%100%110%120%130%140%150%160%19992001200420072010201320162019Pan Eur banks DY rel Global BanksAverage(+/-sd)Global Equity Strategy 15 On sectors,European banks seem to be abnormally cheap versus global banks and the European market using dividend yields.They seem to be discounting negative Bund yields.50%70%90%110%130%150%170%190%19992001200420072010201320162019Pan Eur banks DY rel mktAverage(+/-1 sd)And banks tend to outperform when bund yields rise European banks abnormally cheap relative global banks on DY and relative to European market is back to compelling levels as long as this is not 08/09 Source:Refinitiv,Credit Suisse research 0123456789101997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021European auto component CFROIDiscount rateMarket implied CFROI40%60%80%100%120%140%160%19992004200920142019European Auto comp:Price to Book rel US Auto compAverage(+/-1 sd)Global Equity Strategy 16 There was clear cut sympathy with our call on auto components(very cheap)and airlines(airlines on asset basis at average valuation but industry is much better than average and by mid-19 capacity issues sorted out)Auto components look cheap on P/B relative to US peers 0.400.450.500.550.600.650.700.750.800.850.9019972000200320062009201220152018European airlines HOLT P/B rel market,ex finOn HOLT P/B(relative to the market),airlines are tradi