Richard Cookson, Citi Private Bank’s Global Chief Investment Officer, said, "We would counsel caution for now. If risks do materialize, we think it will lead to investment opportunities that would be an awful lot more attractive than they are now."
The report says that corporate earnings are likely to be more dependent on final demand rather than further efficiency initiatives. So the bank in its report is suggesting investors to stick to companies with stable and high dividends, and stable market shares.
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On a cyclically adjusted price-to-earnings basis, valuations in core Europe and Japan are far more compelling than in the US, the report suggests.
According to the report, the European debt crisis and slowing global growth will be the principal drivers of return in the fixed income markets.
"Our strongest conviction continues to be long-dated high-grade corporate bonds and we favor non-financial issuers in the US, where fundamentals are solid, balance sheets are strong and liquidity is robust and firms continue to seek to pay down debt and raise their credit ratings," the bank said in its latest report.
Publishers of the report expect the dollar to appreciate against most currencies — in particular the euro and the currencies of emerging nations and commodity exporters. They also expect British pound to fare relatively well, as will the Japanese yen.
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