Prepare for new recovery... in 2011

As long as the global economy is slowing down we see the stock market as range bound
with limited upside potential and a downside potential of -10 to -5%.

• We expect a new recovery phase to take over from the current mid-cycle slowdown
  within 3-6 months, which means that global as well as Nordic stocks will reach new cycle
  highs 10-15% up from September 2010 levels.
• For now we recommend investors to overweight Nordic FCF yield cases and to keep an
  overweight in Nordic defensives. EPS downgrades are in the pipeline for Nordic and
  global cyclicals, which should trigger negative cyclical sentiment in the remaining
  months of 2010.
• We recommend to ‘prepare for new recovery’ via an overweight in Financials, Nordic
  stock cases with high EM exposure and directly via investments in EM markets.
• Investors have never ‘bought’ the high earnings potential that consensus analysts are
  seeing in 2011. The US bottom-up estimates imply 4-5% real GDP growth in 2011,
  while investors expect 0-2%. This limits the downside risk and opens up for a strong
  2011.
• In 2011, investors will again see the stock market as attractive value despite a new
  financial and economic paradigm that keeps OECD in a sub trend growth framework and
  global financial returns lower-than-normal compared to recoveries in the most recent 30
  years of financial history. 

 Equity Strategy October 2010