Global Market Update: Equities Still The Place To Be

Equity markets are heading higher, in line with our bullish global asset class strategy, which is outlined in full in Business Monitor Online. We believe further gains lie ahead, given that retail investors are still generally on the sidelines, corporates are in rude financial health, there are relatively lacklustre returns on fixed income, and there is potential for a stronger economic growth this year.

The US Dow Jones is only 700 points off its all-time high, and we expect that it will hit this on a break of 13,663. Apart from US stocks, which we believe will perform well, we have several bullish picks among emerging market indices, including Colombia’s IGBC, China’s Shanghai Composite Index, Vietnam’s Ho Chi Minh City Index, Poland’s WIG20, and Nigeria’s Stock Exchange Index.

And of course, we have several macro-industry plays that have performed extremely well and should continue to push higher, from Chinese healthcare to Commonwealth of Independent States (CIS) agribusiness to US midstream energy. There will be obstacles, of course, with complacency setting in over Spanish and Italian debt sustainability that we believe will be shattered at some point, and a renewed Chinese slowdown before the year is out, according to our core view.

However, as long as the recovery remains intact, with corporate profitability being sustained and liquid assets sloshing around, equities remain king.

This Week’s Trivia Question

Last week, the theme was Venezuela’s political transition. We asked, ‘Venezuela’s Supreme Court recently cited the case of which former senior US official being sworn into his position in Cuba as a possible precedent for allowing President Hugo Chavez to take the oath of office for his new term from the island state?’ The answer was former US vice-president William R. King, who took the oath of office in Cuba in 1853 and died shortly after. For this week’s question, we note that last Wednesday, January 16, marked the 34th anniversary of the departure of the Shah of Iran from his country. He went into exile, never to return, and two weeks later, Ayatollah Khomeini returned from exile to lead the Iranian revolution. On the flight back to Iran, Khomeini was asked by a journalist how he felt about returning. What was Khomeini’s response?