Trade with Greece
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closely correlated to commodity markets are
expected to outperform this average.
In the foreign exchange market, the euro/dollar
exchange rate will continue to range from 1.30 to
1.40, while it is possible to fall to 1.25. Investors
are advised to maintain their positions in their
local currencies, until the situation clears. There is
room for recovery in regard to the pound.
In commodities, bullish trends will persist despite
the tightening of China’s policy. Investment strate-
gies will have to be more flexible, with frequent
shifts among sectors and transactions of a more
short-term nature. For the time being, there is a
preference for metals. Gold prices may rise, but
not to the extent witnessed during 2010.
In the Euro zone, lending spreads have reached
unsustainable levels. Greece, Ireland and
Portugal will use 16%, 12% and 6.5% of their
respective GDPs only for interest payments in
2011. To accommodate these figures, some short
of haircut or debt restructuring will have to be
made in the cases of Greece and Ireland.
DEUTSCHE BANK
The European Stoxx 600 index is expected to
yield an overall gain of 20% in 2011, with the
greatest macroeconomic risk emanating from the
possibility of fiscal derailment in the Euro zone.
Spain will not fall victim to the sovereign debt cri-
sis, and its course towards recovery will continue
unabated.
The financial sector (banks and insurance com-
panies) is an undervalued cyclical sector, which is
considered able to outperform the overall market,
and the Bank’s recommendation has been
revised upwards to “overweight”. There is also
preference for cyclical stocks with low P/Es (once
again, financial sector stocks stand out), while the
media and technology sectors are upgraded to
“overweight”.
In the Athens Stock Exchange, the General Index is
expected to rise to 1,860 points in 2011, while the
recommendation for the Greek market is “neutral”.
In 2011, the DAX 30 index is expected to climb to
7,410 points, the FTSE 100 to 6,880 points and
the CAC 40 to 4,410 points. The Spanish,
Portuguese and Irish markets are expected to
gain 18%, 8.9% and 11.7% respectively.
GOLDMAN SACHS
The combination of above-expectations growth
and mild inflation creates a favourable environ-
ment for higher-risk investments. The baseline
scenario for 2011 is positive, albeit there are still
risks, the most important being the worsening of
Europe’s fiscal position, as a result of the 2008-
2009 crisis. The outcome of the debt crisis in
Europe remains uncertain. Portugal may possibly
seek support from the EU, and, although the case
of Spain is different, a more thorough “cleanup” of
the banking sector might be desirable.
In 2011, investors are recommended to increase
positions in cyclical sectors, with technology get-
ting an “overweight” rating and the outlook for
energy and banks being upgraded from neutral to
“overweight”; defensive sectors, such as health,
retails trade, and utilities, continue to receive an
“overweight” rating.
