US stock market will continue to make new highs because the earnings so far have beaten consensus forecasts. The markets seem to be shrugging of bad news and are focusing on Fed and US data, says Steve Brice
Detroit bankruptcy news is not enough to shake confidence and Standard Chartered Bank remains overweight on US equities, says Chief Investment Strategist Steve Brice.
He expects US stock market to continue to make new highs aided by better than expected corporate earnings. The markets seem to be shrugging of bad news from Detroit and are focusing on Fed and US data, he adds.
Emerging market equities are cheap and oversold from a valuation perspective now, they may see a bounce in the near-term but in the long-term they will underperform US equities.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Is this news about bankruptcy filed by Detroit significant for markets? Will there be exposures for finance companies to the municipality?
A: Clearly, it is an important development but markets seem to shrugging it off quite significantly preferring to focus obviously on what’s going on with regards to the Fed and the data with the initial claims stealing the headlines last night, falling very sharply in the States.
Our key overweight from a global equity perspective remains US equities and this isn’t enough to shake that confidence in our view. We are in earning season at the moment, earnings still beating the revised down consensus forecasts and that’s likely to be enough I think to allow stock market continue making new highs.
Q: Is the US strength now becoming the emerging markets' weakness. The decoupling has come but it is looking way more exaggerated than emphatic now. Is every uptick in the US now becoming a burden for emerging markets?
A: I do not believe that's necessarily the case, obviously we are seeing a reallocation out of emerging market equities into the US. So if you look at from that perspective it is a significant factor but if we do still see the US economy doing well and accelerating in the second half as we expect, that can only be positive for the emerging market equities.
Overall, we are looking at some of the countries now and some of the Asian markets are looking quite cheap from a valuation perspective and some of the markets are looking oversold as well. So, in the short-term we are expecting a bounce which would be consistent with stock market in the US doing well but we still expect emerging market equities to underperform the US and the other developed market equities as well.