Market Outlook in 2016 by Strategist at HSBC and Madison Street Capital

Strategists at HSBC Holdings PLC have urged caution to investors intending to buy falling stocks. This news comes at a time when the world equity markets are experiencing some recovery after uneasy start to the year. In an article written by Julie Verhage on Bloomberg Business, Fredrik Nedbrand of Global Head of Asset Allocation affirmed that cash is still king. He affirmed that while there was a remarkable recovery after the January sell-off, entering into the equity risk was not a smart move. Fredrik instead recommends investing in high-yield and emerging market debt, whose risk premia is more appealing.

The strategists at HSBC cite existing lofty valuations and a slowdown in corporate earnings as the main reasons for the continued caution. On lofty evaluations, HSBC points that whereas valuations have become more attractive over the course of the downturn. The existing market dynamics have made it difficult to snap-up market bargains. The team is highly skeptical of how valuations will play in the near future because valuations were not the basis for the market stabilization or selloff. In the second analysis, HSBC strategists observe that there has been a great deal of talk about profit recession over the last few months.

The strategists believe the pressure on earnings is bound to erode any bullish feelings towards stock purchase, unless earnings begin to rise. HSBC’s cautionary sentiments follow calls by various Wall Street firms who have been saying that the odds of global recession will continue to linger on for a while. In the meantime, JPMorgan Chase & Co has told investors to take advantage of the recent market rebound to sell stocks. They cite dwindling corporate earnings, looming risk of recession and worsening economic outlook as some of the factors that have informed this decision.

Madison Street Capital
The other key player in the financial advisory sector is Madison Street Capital. This boutique investment banking firm offers a host of services including; mergers and acquisition, buy out, reorganization, capital restructuring and private placement advisory services. On February 9, MSC offered its 2016 hedge fund and mergers and acquisition outlook. According to the business and marketplace promotion site, the firm reported that 42 hedge fund deals were announced or completed globally in 2015. This was a 24 percent rise from the 2014.

Madison Street Capital noted that assets held by the hedge fund industry were at a record high despite poor performances by majority of hedge fund strategies in the year under review. The other notable shift was a move by institutional investors to alternative asset management sector. The move is aimed at increasing the prospects of attaining high returns in order to match rising liabilities. MSC predicts a brighter deal environment in 2016.

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