Dubai:

Investors feel that equities are now viewed as the most valued in seventeen years, according a survey conducted by Bank of America Merrill Lynch.

About 33 per cent of the investors feel European elections causing disintegration risk was the biggest in 2017, while the other fifth felt that trade war was one of the bigger risk.

Whereas yields remained too low to hurt stocks. About 67 per cent said 10-year Treasury yields of 3.5-4 per cent was needed for an equity bear market.

In addition, 36 per cent say higher rates the most likely catalyst to end the bull market. As far as growth and inflation was concerned, expectations for faster global growth stayed high at net 58 per cent, which is down slightly from net 59 per cent last month. Inflation would remain elevated in 2017.

An overall total of 200 panellists with $592 billion of assets under management participated in the survey.

Deutsche Bank’s view:

Meanwhile, investors should sell German stocks as they rank as the most expensive among major European indexes, afflicted by high price-to-book ratios and low dividend yields compared with peers. That’s the view of Deutsche Bank strategists, including Wolf von Rotberg.

Assessed against the bank’s European country valuation scorecard, Germany had its largest underweight rating. German equities tend to struggle when European cyclicals underperform defensives, a situation the strategists predict is approaching. The DAX Index is among the most cyclical of the region’s benchmarks and is priced for further positive Euro-area macroeconomic surprises, optimism that may have become stretched, they said.

Deutsche Bank also recommends avoiding French stocks. The CAC 40 tends to track Euro-area PMIs and now fully reflects positive growth scenarios, the report shows.

The strategists favour the UK, their largest overweight recommendation, as its stock market is a defensive beneficiary from further pound weakness. Switzerland and Italy merit small overweights: Switzerland as a defensive US dollar play, while Italy’s attractiveness stems from fading political risks.