The outlook from Barclays Capital is that,in reality,the macro environment's been deteriorating for the past few months.It's the end of the inventory replenishment cycle.There is no evidence of increased consumption.The Cisco news was a shocker on business consumption.Clearly it's not sustainable.Given the shape of the labor market,there will be no improvement over the next 4-6 weeks.
Barclays thinks 2011 earnings will be up 5%,not 15%.Current stock valuations are relatively attractive,but clearly there's a risk of tipping back over.The potential of a tax hike could tip us over the edge.
Barclays has increased its allocation of staples and utilities.If we can get through to the other side,the two cyclical sectors with the best chance to be secular leaders would be industrials and tech.Barclays has taken tech down for the next several months,however,as the chip replenishment cycle is over.
Barry Knapp is Chief U.S. Portfolio Strategist at Barclays Capital.
Barclays(BCS),Cisco(CSCO)
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