Investors should get ready to buy stocks, as an equity rally is coming in the fourth quarter of this year, says Bob Parker, senior advisor at Credit Suisse Group.
The U.S. economy will not experience a double-dip recession plus expectations for healthy third-quarter profits to be released at the end of the year will fuel a rally, especially in German and Scandinavian markets.
“I think the first catalyst will be a change in investor expectations towards whether we have a double-dip recession or not,” Parker tells Bloomberg Television.
“We have consistently said we are going through a period of weak economic growth in America, and we’ve obviously got problems in Southern Europe, but we don’t think we are going into a double-dip recession, and I think investors will wake up to that.”
Third-quarter corporate earnings to be announced in October and November should be consistent with the good numbers released in the second quarter, Parker says.
“Don’t forget that the amount of investor cash and corporate cash sitting on the sidelines is at a near record high.”
A recent survey of 31 economists shows that a double-dip recession is unlikely albeit growing, according to CNN.
The survey shows that the chance of another contraction next year is around 25 percent, up from 15 percent six months ago.
“Consumers are totally retrenched,” says Kevin Giddis, managing director of fixed income at Morgan Keegan.
“They’re concerned about jobs, uncertain about taxes and not sure the administration has a handle on what to do. Businesses are finding that it's better to clean up their balance sheets than it is to hire people.”
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