SocGen: Here Are The Macro Themes That SCREAM Equity Rally

While world markets waffle heading into the end of 2010, on uncertainty in Korea, the crisis in Ireland, and fears over China tightening, Societe Generale see it another way.

SocGen see 2011 ripe for an equity rally based on several macro themes.

  • Improving economic data in the U.S.
  • Global growth data holding up
  • The Fed, through QE2, intending to boost valuations
  • And historical trends that suggest this rally will grow

Theme 1: The U.S. is back.

Economic data is surprising positively in the U.S. now.

Manufacturing activity is not only positive, but is also suggesting future growth.

Recent employment data has showed the sort of improvement necessary for consumer growth.

Theme 2: World growth is still going strong.

Emerging markets included.

China has had a strong rebound, which indicates the global economy is set for more growth.

Rising Chinese car sales are evidence of that demand.

It also means inflation expectations should be rising, and they are.

Theme 4: History shows were returning to a situation where dividends will be more important

The 80s trend of valuation growth ignoring cycles may be at an end.

It is now likely equities will continue to rise, since we haven't seen a double-dip.

And we're likely to see a much larger increase after the sideways movements of 2010.

Equities are now cheaper than bonds.

So stock prices are likely to move higher.

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