Credit Suisse’s economists predict Europe will experience further growth with the Euro-crisis largely resolved due to liquidity from central banks and capital inflows.
It expects European GDP growth will increase by just under two per cent for the next year, and predicted that even Greece will experience growth after six years of recession.
While the US is still generating a higher rate of growth compared with Europe, Credit Suisse said the rate of US growth has fallen from 3.5 per cent prior to the global financial crisis down to its current 2.5 per cent, due to declining labour participation and structurally subdued business investment.
It has therefore decided to remain underweight in US equities as it believes valuations are high compared with the rest of the world.
In terms of Australian equities, Credit Suisse said there are a number of bottom-up positives likely to drive prices higher, including “rising cash flow, solid distribution growth and the world’s highest dividend yield”.
Credit Suisse said the ASX 200 is on track to meet its end of year target of 5,600 and provide an average total return of nine per cent.
It is also bullish on Japanese equities given its potential for greater stimulus.
