According to Credit Suisse’s 2Q 15 Outlook, the upside to global equities is supported by a number of factors.
“First, equities continue to remain attractive versus other assets — the US equity risk premium is 5.7 per cent versus its long-term average of 3.2 per cent,” the report said.
“Second, the combination of stronger growth and loose monetary policy creates a favourable environment where equities are considered an appropriate inflation hedge.
“Third, 75 per cent of European and 65 per cent of US companies have a free cash-flow yield above their respective corporate bond yield, supporting further corporate buying.”
The US will remain the key driver for growth in the global economy, supporting other developed markets, said Credit Suisse.
Credit Suisse predicts that global GDP will climb to 2.8 per cent in 2015, up from 2.6 per cent the previous year.
Moreover, the outlook for Australian equities remains positive.
“Aussie stocks will continue to be in demand as international and domestic savings pools seek income,” Credit Suisse said.
“Our new forecast suggests Aussie investors should enjoy around 25 per cent total returns in calendar 2015.”
