SocGen’s investment strategy for 2010

By Prieur du Plessis, on January 14th, 2010 posted in: Investment, Markets, Money

This post is a guest contribution by Dian Chu, market analyst, trader and author of the Economic Forecasts and Opinions blog.

Société Générale (SocGen), France’s second-biggest bank, has told its clients to be bullish on commodities, stay with stocks and “anything but cash” in 2010. SocGen’s Chief Strategist Alain Bokobza spoke to CNBC on January 11 about their investment strategy.

Fear of double dip to prevent bond crash

Bokobza sees an ongoing momentum for growth in the US with higher employment, as well as in the emerging economies. The consensus seems to be we are heading towards a bond market crash in 2010; nevertheless, fear of a double dip will prevent such a crash.

The US Federal Reserve and G4 countries are expected to stay on a near-zero interest rate for much longer than expected, which makes yield curve play attractive.

Yen – the carry trade currency

Bokobza expects the US Federal Reserve and the ECB to announce this summer that the monetary tightening process will start at the end of 2010 or in Q1 of 2011. At the time of the announcement, i.e. this summer, the carry trade will begin to switch from dollar to yen.

Overall, the dollar is expected to be fairly flat against the euro by the end of this year; however, the yen, as the new major carry trade currency, will fall “massively”.

SocGen’s main advice for 2010

With near-zero interest rates, getting out of cash and into other riskier assets such as equities or commodities should be the strategy this year.

• Anything but cash

• Stay in equities

• Expect rising merger and acquisition cycles

• No bond market crash

• Yen carry trade

• Be a commodity bull

Refer to SocGen’s research report dated Jan. 4, 2010 at Scribd.com here for full commentary and recommendations.

Video Source: CNBC, January 11, 2010.

Source: Dian Chu, Economic Forecasts & Opinions, January 11, 2010.

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