From UBS’ Jonathan Golub:In the current, high-volatility environment, many investors have opted to take down risk exposures until conditions renormalize. While we believe macro headlines will continue to drive the market, we believe now is the time to extend portfolio risk for three reasons: 1) improving U.S. economic data; 2) likelihood for greater clarity in Europe; and 3) greater differentiation between stocks in 3Q earnings season.
The first point, the improvement in the data, is amusing, as talk of a double dip is fading.
Here’s Morgan Stanley’s David Greenlaw’s latest take on GDP:
While growth has slowed since the plunge in confidence and market weakness in August, so far the deceleration seems to have been modest. We see Q3 GDP rising 3.2%; while this largely reflects the June/July rebound from some temporary first half drags, data since the turmoil began in August have held up fairly well. We see Q4 slowing not too severely to +2.2%. We continue to forecast growth near 2% over the four quarters of 2012, with a sub-1% reading in Q2 2012 assuming expiration of the payroll tax cut.