Global equities to push higher through mid-2017, says SocGen

Global equities should push higher through mid-2017, Societe Generale said, thanks to stronger growth and a better inflation outlook, along with continued decent yields.

After that, the global equity market should start to focus on the next recession in the US, which is expected in 2018/2019.

“In addition, even though overall upside may feel limited, there are opportunities for large equity returns on some focused segments of the market, as seen so far this year.”

As far as the US is concerned, the French bank expects the S&P 500 to push higher still despite already hitting a new all-time high over the summer. It cited a still soft Fed, more fiscal easing, higher oil prices and accelerating M&A as catalysts.

The bank said it has raised its exposure to the consumer discretionary sector to better gear itself to the eurozone consumer as it pointed to a lower unemployment rate and better economic return for the region.

“The sector is lagging its US peers and should benefit from rising consumer confidence.”

The bank also said it was gearing up to fiscal easing. For the first time since the euro area crisis, the overall fiscal stance in the bloc should turn into easing in 2017, it said.

“We continue to gear our portfolio to the construction sector, which should benefit from this change in policy.”

SocGen said oil and gas remains one of its preferred sectors, as it offers some of the highest yields and the fundamentals are still supportive of oil prices.

The bank cut its rating on the Steel, Metals & Mining sector following a 31% increase year-to-date, noting that the sector trades at a big premium compared to historical standards.

It also takes profits on its strong call on the FTSE 100 after a significant outperformance year-to-date in Europe.

“Most of the sterling’s depreciation versus the euro is complete. With higher inflation and lower growth expected in the UK next year, go short UK domestic names and long USD earners listed in London.”