Equities: Recovering most of the losses by year-end – Deutsche Bank

Economists at Deutsche Bank are neutral on equities near-term, but more constructive further out conditional on economic recovery.

Key quotes

“While the S&P 500 rally since the March 23 bottom has been quite sharp, we note it has been led by defensive sectors and stocks, and not the cyclical sectors, Value and Small-cap stocks that typically lead when markets price in an economic rebound.”

“Our baseline scenario sees Q2 as the bottom in global growth and earnings, and we see equities recovering most of their losses by year end in historically typical manner.”

“Much depends on whether recovery begins in Q3. If it does not, equities would be expected to fall further and we would expect a bottom 5% lower than the last one, so a peak-to- trough decline of around -40%.”