Credit Suisse has released its Australian Investment Strategy report, on the outlook for equities in 2014.
Four points from the report tell you everything you will need to know about Australian stocks next year.
From Credit Suisse, here’s your quick guide:
1. ASX 200 at 5,600 by Dec-2014
For Australian equities, 2014 will be a battle between uninspiring valuations and sluggish profits versus accommodative monetary policy and rising cash-flows.
We forecast the ASX 200 to finish 2014 at 5,600. Investors should expect a total return of 9%.
2. Flat EPS, rising distributions
A mediocre outlook for Australian domestic demand should hold down profits growth. However, falling capex will free up cash flow to raise distributions.
Accommodative monetary policy will help valuations continue to overshoot.
The biggest downside risk to our positive view is an end-cycle contraction in Australian profits, potentially stemming from a sharper fall in investment.
Policy errors, either here or abroad, is another risk.
4. Sectors & Stocks
Strategy Longs Ideas include self-help candidates like Amcor, Caltex, QBE and Fortescue.
Short Ideas include Suncorp, Santos and Newcrest. Sharply rising free cash flow and cheap valuations means we prefer big miners over big banks.