Despite the 14% rally in global stocks since early November, UBS economists believe that more hikes are coming as vaccines roll out.
Key Comments:
“Based on estimates of vaccine production, We expect both a relaxation of restrictions and a recovery in consumption in the service sector, such as traveling and eating out, in the first half of 2021. This should fuel a recovery in corporate earnings. We expect EPS growth of 27% in fiscal 2021 globally. “
“By June 2021, we expect the S&P 500 to trade at 3,900 in our baseline scenario. (rise of 6%). If more vaccines are available in early 2021, this would increase the chances of achieving our bullish scenario, in which we are targeting 4,100 for the S&P 500 (up 11%) “.
“The overall performance of small-cap companies have disengaged from their traditional macroeconomic driverssuch as inflation expectations, the yield curve and the US ISM index As the economy normalizes, we believe that small caps will benefit from both an improvement in these indicators and a reestablishment of historical correlations. , which point to greater upside potential. “
“We like American mid-caps, which tend to outperform larger companies in the early stages of an economic recovery. and are currently attractively valued. The Russell Mid-Cap Index is trading at a 2% P / E discount to the Russell 1000, compared to a long-term average premium of 6%. “
“Our first choice region is still UK equities. MSCI UK is trading at an 18% discount to global equities on a price-to-earnings ratio, but offers earnings growth of close to 40% in 2021 according to our forecasts, driven by the global economic recovery and an expected improvement in oil prices. In the event that the UK and the European Union are unable to reach a post-Brexit trade deal, we expect a flat or slightly negative impact on the MSCI UK index overall, as the likely resulting decline in the British pound would boost the profits abroad and would help offset the blow to domestic sectors. “
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