Barclays: Equities Will Rule In 2011
NEW YORK (
) --
Barclays Capital
(BCS) - Get Report
analysts said that next year equities will outperform while U.S. Treasuries will lsuffer.
"It is a great environment for stocks, but not a particularly good environment for bonds, particularly sovereign bonds," Larry Kantor, head of research at Barclays Capital said at a meeting in New York Thursday.
Kantor recommended going long in equities to take advantage of an improving economy and low interest rates, high profit margins, a strong corporate environment and high equity risk premiums. He expects a more favorable environment for financial stocks and that overall profits will move even higher in 2011.
Kantor added that the European debt crisis is likely far from over and there will be risks especially in sovereign credit.
"Portugal is by no means stable. The key to whether or not this becomes a global issue depends on if they start effecting Spain or Italy," said Kantor.
Analyst Ajay Rajadhyaksha, head of U.S. fixed income & securitized products strategy said that banks and money managers are likely to pick up at least $200 billion in mortgage assets as the three government-sponsored entities, such as Fannie Mae
(SYMBOL)
and Freddie Mac
(FMCC.OB)
, move their mortgage investments into "runoff."
"The government has to let the private sector back in," he said. "That change will have to happen slowly, likely over the next 15 to 20 years."
The credit markets will also make a comeback in 2011, according to Brad Rogoff, co-head of U.S. credit strategy.
"We have a positive view on credit spreads, but there will also be constrained returns," he said. "There will be a tightening in the credit spreads, but expect returns of 15 basis points in the U.S."
--Written by Maria Woehr in New York.
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