NEW YORK, March 12 A month after turning
cautious on global stock investing, the investment committee of
Credit Suisse Group's U.S. private bank has reversed
"Plentiful liquidity, attractive valuations and low
inflation make equities among our best options in an asset
allocation context," a team led by Barbara Reinhard, the unit's
chief investment strategist, wrote in a note to clients.
The strategists were alarmed in early February about
political stalemates in Spain and Italy, the sequestration
congressional crisis in the U.S., bailout talks in Cyprus and a
seemingly overenthusiastic rush into equity mutual funds. The
trends led them to put a tactical alert on stock investing over
the next one to six months.
Last week, however, they decided that issues in Europe were
country-specific rather than systemic, that central banks in the
U.S. and Europe will continue their stimulative monetary
policies and that investor optimism in the U.S. has cooled
enough to guard against hyped-up stock prices that will quickly
fall, according to the report.
Though the S&P 500 index is quickly approaching the all-time
high it set in October 2007, investors should take the plunge by
reentering the stock market in phases, the strategist wrote.
Caution about investing in stocks after two long bear
markets in the past 10 years is understandable and "poignant,"
they wrote, given that investors are sitting on "high cash
holdings in spite of several years of decent equity market
The Credit Suisse strategists recommend a phase-in strategy
for getting back into the stock market. Rather than plunging in
with all their cash, investors should use one of three
strategies: investing 25 percent in stock every three months for
the next year; investing one-third in stock every six months; or
investing 50 percent initially followed by the remainder in two
25 percent allocations over the following six months.
"While we know that, objectively, investing all-at-once
produces the best return over the long run, a phase-in strategy
can help investors who are entering equities neutralize some of
the emotion that may arise in the event of an interim
pull-back," the private banking strategists wrote.
Analyzing 12-month returns on the S&P 500 index since 1926,
the strategists found that the all-at-once strategy yielded a
return of 11.0 percent compared to 7.4 percent to 9.7 percent
for the various phase-in strategies.
Credit Suisse's private banking group in the U.S., Canada
and Latin America, which includes about 600 relationship
managers selling investments and financial planning services to
wealthy individuals, reorganized last week.
Philip Vasan, who ran the bank's fast-growing prime
brokerage business for hedge funds, is replacing Anthony
DeChellis as head of the group.
Vasan will assume his new post in April and will report to
Rob Shafir, global cohead of private banking and wealth
management at the Swiss bank.