Top Investment Ideas For 2015

Theme 1: Developed Equities Take Center Stage

Credit Suisse believes developed-market equities can generate solid returns in 2105. This is the result of an economic environment that is visibly recovering, driven by continued growth in the US. European growth is slowly advancing, and recession will likely be prevented. China will also remain a driving force, even if growth there is slowing slightly – a full-blown hard landing is unlikely.

1. Against this backdrop, Credit Suisse recommends the following three equity ideas to investors: US large caps are benefiting from US economic growth, and are also in a position to ensure stability even when markets are volatile.
2. In light of the growing volume of M&A activity, equities of companies that are beneficiaries of potential takeover bids are proposed.
3. Thirdly, carefully selected European stocks with an emphasis on exporters and banks are favored.

Theme 2: Pathways to Yield

This theme is based on the expectation that monetary policy in the major developed countries will move in opposite directions. In the US, the first hike in interest rates is expected from the mid-point of 2015; in the euro zone, further monetary policy measures will be needed in order to stimulate the economy.

1. The search for yield in the fixed-income sector is becoming increasingly difficult. As a result, a careful selection of corporate bonds, subordinated bank debt, as well as bonds from emerging-market countries with a sound economic balance sheet are recommended.
2. Dividend-paying stocks remain endorsed, based on the general assumption of a rise in dividends over the course of the year.
3. Finally, market-neutral and long-short strategies should serve as an effective means of ensuring yield in an uncertain macroeconomic environment.

Theme 3: The Winners from Lower Commodity Prices

Based on Credit Suisse’s assessment, lower commodity prices –oil prices in particular – will persist for quite some time. That is good news for countries dependent on imported oil, including a large proportion of Asia’s developing countries. Furthermore, EM companies that are big consumers of energy and commodities will benefit from lower production costs.

1. Equities of selected countries and companies that are boosted by low commodity prices are recommended. It is important to point out that today’s emerging-market economies often have very different characteristics, a factor that is also likely to be reflected in their potential for generating added value. Stocks should therefore be selected with the greatest of care, as low commodity prices can be a problem in themselves for the EM asset class.
2. In addition, US consumer discretionary and energy-consuming industrials are likely to benefit from lower oil prices.

Theme 4: Growing Value Capture in the IT Sector

The fourth theme is devoted to the technology sector. Significantly, investment spending has in many instances been neglected in recent years. Credit Suisse therefore expects to see companies increasingly revamp their information technology base. Time-wise, we are also at a point of significant technological innovation that will fundamentally alter our lives. Technology groups are at the center of this transition to the Internet of Everything and the Sharing Economy, and equity valuations of technology firms are still attractive in view of the potential upside.