(Bloomberg) -- Investors should not sell equities because a global economic recovery next year will boost profits, said Credit Suisse Group AG.Global gross domestic product will grow 4 percent next year, while the U.S. economy will expand by 3 percent and profits will rise 29 percent, a team led by London-based Andrew Garthwaite, the brokerage’s chief global equity strategist, wrote in a report dated yesterday. “Don’t sell equities,” the analysts wrote in the 26-page report. “If anything, we believe that the risk/reward trade-off favours some of the defensive sectors in the near term.”
The MSCI World Index of 23 developed markets has rallied 60 percent from a 13-year low in March. The gauge has lost 5.6 percent from its 2009 high reached on Oct. 19 amid concern stock valuations have overshot the fundamental outlook.The equity risk-premium indicates stocks are still cheap, Garthwaite said. Based on consensus earnings forecasts, U.S. equities are set to return 5.5 percent more than risk free bonds, Credit Suisse said. That’s above the historical premium of 3.6 percent, according to the report.
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