Investors could be in for a rough ride in the global equity markets over the summer, with continuing earnings warnings, poor economic news and fragile investor psychology.
That is according to Merrill Lynch, which is predicting a bumpy ride into the autumn. It sees three risks that will affect investors in the coming months - a deteriorating labour market in the US economy, negative industrial production growth in Europe and no clear signs that the global inventory cycle is stabilising.
Investors are being advised not to chase cyclical stocks any further in these conditions with defensive plays being suggested as the best option. Stocks in the energy sector in particular are being recommended as one of the safest bets. The brokers believe there will be more earnings warnings in the coming weeks and is suggesting that investors should monitor their exposure to the technology sector closely.
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