RBC Capital Markets had been cautious on stocks, going into 2012 with a neutral weighting on stocks. Here’s what Chief Institutional Strategist Myles Zyblock said back in December:Domestic data has started to come in a little better than expected in recent weeks. However, these positive developments are being offset by uncertainty related to the consequences of a global debt overhang and how policy makers might respond to the challenge. Volatility will probably remain elevated until the authorities offer much better policy visibility.
However, Zyblock has now turned more bullish on stocks, upgrading equities to “above-benchmark weighting.”
We are moving to an above-benchmark weighting in equities. Financial strains are starting to moderate, an objective measure of political uncertainty has crested, and the economic outlook is showing signs of improvement. These developments are likely to provide lift for valuation multiples and support further gains in the equity market
Regarding political uncertainties cresting, he points to this measure of political uncertainty.
An index of economic policy uncertainty created by Professors Bloom (Stanford) and Davis (Univ. of Chicago) recently rolled over from a very high level. The indicator is consists of: (i) the frequency of references to economic uncertainty and policy in Google; (ii) the number of Federal tax code provisions set to expire in future years; and (iii) the extent of disagreement among economic forecasters over future Federal government purchases and CPI inflation.
Photo: RBC Capital Markets
Within equities, RBC favours industrials, consumer staples, and information technology.