Barclay's Recommends Going Long 10-yr Bonds, Gold, Defensive Equities
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In a report covering their view on the global outlook, Barclay’s said they expect solid performance to continue as the environment for taking risk has been, and continues to be, very favorable. While acknowledging headwinds, including the pace of the economic recovery in the U.S., analysts feel investors have the major central banks on their side which should help support higher asset prices, although they do not expect a boom anytime too soon.
Highlights
Bonds:
"We maintain our long duration view in the US. Economic data remains modest and markets are underestimating the cumulative amount of Fed purchases under QE3," said analyst. Among their recommendations, they are long US 10-yr Treasures with year-end target of 1.5%
Commodities:
"With global growth looking weaker, we doubt whether the steps taken recently in Europe, the US or China are a real “game changer” for many commodities," said analysts. Gold is the exception. Barclay’s recommends a long position in March 2013 gold futures.
Equities:
According to the report, central bank accommodation has provided support, but to push equities significantly higher, the economic or public policy outlook needs to improve.
"Stocks with bond-like characteristics – defensives, high dividend payers and largest cap – should perform well," said analysts.
"We recommend expressing a tactical view on limited upside in US equities by buying SPX call ratios (buy 1x ATM calls and sell 2x OTM calls). The high level of short-dated volatility relative to historical volatility and relatively flat skew also benefit this strategy."
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Highlights
Bonds:
"We maintain our long duration view in the US. Economic data remains modest and markets are underestimating the cumulative amount of Fed purchases under QE3," said analyst. Among their recommendations, they are long US 10-yr Treasures with year-end target of 1.5%
Commodities:
"With global growth looking weaker, we doubt whether the steps taken recently in Europe, the US or China are a real “game changer” for many commodities," said analysts. Gold is the exception. Barclay’s recommends a long position in March 2013 gold futures.
Equities:
According to the report, central bank accommodation has provided support, but to push equities significantly higher, the economic or public policy outlook needs to improve.
"Stocks with bond-like characteristics – defensives, high dividend payers and largest cap – should perform well," said analysts.
"We recommend expressing a tactical view on limited upside in US equities by buying SPX call ratios (buy 1x ATM calls and sell 2x OTM calls). The high level of short-dated volatility relative to historical volatility and relatively flat skew also benefit this strategy."
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