In its investment outlook for the second half of 2021, investment bank Credit Suisse (NYSE:CS) forecasts that the world economy will grow 5.9% this year and 4% in 2022.
Growth will be spurred by vaccine rollouts, fiscal stimulus and a broadening services recovery, says Credit Suisse. The bank also said the U.S. is set to grow at a rate of 6.9% this year, the Eurozone will expand by 4.2% while Asia ex-Japan is predicted to grow 7.5%.
Economic expansion will likely lead to a sharp recovery in global earnings growth that is set to fuel the stock market, according to Credit Suisse.
In the equities market, Credit Suisse said it prefers exposure to cyclical sectors such as financials and materials. Cyclical stocks are companies whose underlying businesses tend to follow the economic cycle of expansion and recession.
The Swiss bank also prefers cyclical markets in Europe such as the United Kingdom, Germany and Spain. Europe, as an equity market, is going to produce about the same earnings growth as the U.S. in 2021 but it is doing it at "valuations that are literally multi-decade lows on a relative basis," says Credit Suisse.
