IT TAKES some guts to be a bear about the sector you cover if you are an investment strategist. Generally speaking, strategists are employed by banks and banks are in the business of selling securities, the clients are fund managers who do well when asset prices rise and thus tend to dislike a party pooper. Albert Edwards of SocGen is a long-standing bear of equities as a class and many owe his longevity to the entertaining way he phrases his opinions.
Life is easier if you have independence. John Paul Smith was a strategist at Deutsche Bank but now gives advice from Ecstrat, a research house. He has been a bear on emerging markets for a few years; as I wrote in this week's column, that was a lonely position a while back. In a new note, he restates the bearish view.
First, he points out that, post the financial crisis of 2008, there was a shift towards a more state-driven model for economic activity; he felt that this would undermine productivity and thus economic growth. Growth has indeed declined. Second, the EM corporate sector was overinvesting and this would lead to a lower return on capital. Third, slower economic growth would bring down commodity prices and hurt producing countries. Fourth,...Continue reading
Source :Business and finance http://ift.tt/1gtODx4
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