Credit Suisse Takes Stock Of How Its 2014 "Top Ideas" Have Worked So Far

Tom Burroughes

9 April 2014

Strategists at Credit Suisse’s private banking and wealth management arm are rubbing their hands with pleasure at how some of their “top ideas” for 2014 have worked out, although they are also licking their wounds over themes that haven’t worked out so far.

With the first quarter of the year behind it, the Swiss bank said that taken as a whole, its top ideas have, on average, made ground since they were put into action, with the exception of its “emerging markets reloaded” ploy and its “China reform re-accelerates” recommendation on the country’s equity markets

“Europe’s recovery” and “Seeking equity alpha” ideas have made ground, with absolute returns since inception of 4.2 per cent and 2.2 per cent, respectively. Another idea, focusing on “cash-rich companies”, has seen absolute performance of 6.2 per cent. Another idea “FX as the Fed tapers” – which is based on how currency markets will behave as the tap of easy money is switched off, has been flat so far since inception, Credit Suisse said.

“We remain positive on the European recovery as we see macroeconomic momentum developing favourably. The situation is probably is the largest single risk for the economy,” the bank said. “The worst case would be prolonged uncertainty in combination with substantial retaliatory measures by Russia

“Elsewhere, we see the economic situation developing favourably in Europe and the US. Therefore, we continue to believe that European companies could stand to benefit from growing demand for consumer goods and industrial equipment as the European economic recovery gathers pace,” Credit Suisse said.

Turning east, the Zurich-listed bank said geopolitical risks and worries about China’s growth rate have been a headwind for emerging market equities so far this year; it expects Chinese-linked assets will remain volatile in the second quarter, but expects the investment outlook to brighten in the second half of 2014.

The MSCI BRIC Index of returns has fallen almost 2.0 per cent since the start of the year, while the MSCI World Index of developed countries’ index shows returns of 0.42 per cent.