Diverging policy directions between the US Federal Reserve and the People’s Bank of China, according to Deutsche Bank AG, will contribute to more stock market corrections in the United States, with China benefitting by partnering with some other Wall Street institutions.
Last Monday, Deutsche Bank’s worldwide private banking unit downgraded US stocks from overweight to neutral, putting an end to a period of euphoria that had lasted since November 2020.
Concerns about inflated valuations and market fluctuations
“Worries over overvaluations and market swings due to the pace of Fed rate hikes drove this move,” said Jason Liu, Asia’s investment office head.
Deutsche Bank’s views are similar to those of Goldman Sachs Group Inc. and HSBC Holdings Plc., whose strategists are also advocating the variety of US shares.
Concerns will lessen in the second half as pricing slows, according to Deutsche Bank, which predicts the S& P 500 index to exceed 5,000 points by the end of 2022, thanks to higher-than-expected profits and 4% economic growth.
Liu said it was important to plan forward for China’s comeback, particularly since the central bank lowered its benchmark interest rate earlier this month. He loves high-tech manufacturing, health care, and consumer companies in China.