April 29, 2016

Quick Note: Downgrading US, Europe and Brazil !
We are downgrading three markets on the back of sharply higher prices and stagnant or deteriorating fundamentals.

by iFAST Research

 Quick Note: Downgrading US, Europe and Brazil!

  • Equity markets have staged a strong rebound since we upgraded the markets on 12 February 2016
    • Market Performance: US +12.4%, Europe +11.5%, Brazil +36.9% (in local currency terms)

  • While equities have moved sharply higher, underlying fundamentals have either remained the same or posted slight deterioration for the three markets

  • Higher prices with lower earnings estimates have resulted in higher valuations for all three markets, leading to lower forecasted returns for investors
    • Expected Annualised 2 Year Returns: US -0.6%, Europe +1.2%, Brazil +4.1% (in local currency terms)

  • We are downgrading the Star Ratings of the markets as follows:
    • US - From 2.5 "Neutral" to 2.0 "Unattractive"
    • Europe - From 3.0 "Attractive" to 2.5 "Neutral"
    • Brazil - From 4.0 "Very Attractive" to 3.0 "Attractive"

  • Investors should not chase prices or performances, consider seeking more defensive strategies for US and Europe, relook their portfolio allocations

  • Full updates for all three markets to follow

Chart 1: US Equities


Chart 2: European Equities


Chart 3: Brazil Equities


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