If I believe in Warren Buffett, if I believe in John Paulson, then I will believe that the economy will not tank next year, that is, there will no double dip recession. I happen to believe in them.
According to Allan Brown, CIO of Schroeders, we could easily see double-digit returns for equity markets next year. This is due to price-earnings-multiple expansion and moderate earnings growth. He has 36 years of investment experience, and he thinks that there will be no double dip recession.
He is most bullish on emerging markets, and is of the view that equities in these markets are far from a "bubble". Yes, they may be expensive compared to their peers in Europe and US, but that is justified.
He also feels that interest rate hikes will be gradual, and although equity markets could respond negatively for a few months afterwards, they should get back to normal. Interest rate rise is good as it reins in inflation. Inflation is bad for equities. High inflation leads to PER contraction, and low inflation causes high PER.
Brown is most positive on technology stocks in 2011, as a beneficiary of the ongoing capital spending cycle. He is also bullish on agricultural commodities and gold.
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