JPMorgan Chase & CoAnd Goldman Sachs GroupStrategists think the stock rotation is just beginning.

Credit Suisse analysts say bond funds will start to switch to equities

While investors are nervous about high valuations and rising interest rates, equity strategists are as bullish as ever.

Goldman Sachs Group and Credit Suisse strategists expect stocks to climb further as investors withdraw money from bonds and cash and economic growth accelerates. Abby Joseph Cohen, a senior investment strategist at Goldman Sachs Group, said that even if some stocks fall because of higher interest rates, other sectors will rise strongly.

"We are seeing this very important change," Cohen said in an interview with Bloomberg Television. "We find that stocks that have benefited from the end of the epidemic blockade are doing well and good news about vaccines will help."

Goldman Sachs Group expects the s & p to reach 4300 by the end of the year, meaning it is up 13% from its current level, setting another all-time high. Analysts surveyed by Bloomberg have a median forecast of 4100 for the year-end target of the S & P 500, which currently stands at 3850.

Credit Suisse Andrew Garthwaite said this was the beginning of the transfer of bond funds into equities. He released a report on Monday that stock and bond yields were positively correlated in February, while in the past, the stock market rose by an average of 6% six months later.

"We are worried when US 10-year bond yields rise above 2 per cent, inflation expectations exceed 3 per cent, or inflation-protected bond yields rise sharply," Credit Suisse strategists write. At present, these conditions are still some distance from realization. The bank stuck to its forecast that the global index, which excludes the US, would reach 375 by the end of the year, up 13 per cent from today's level.

Goldman Sachs Group puts forward similar reasons for being bullish on stocks. "as a lesson from history, equity funds usually see inflows when real interest rates rise," strategist David Kostin et al said in a report released on Friday.

The bank forecasts that households will be the largest source of demand for US stocks, with purchases estimated at $350 billion this year. Goldman Sachs Group said that with the resurgence of share buybacks, the size of corporate purchases will also reach 300 billion US dollars.

According to JPMorgan Chase & Co strategist Mislav Matejka, the shift from technology stocks to cyclical stocks is not over, aviation, hotel and car suppliers are attractive, and investors should consider shorting online retail and technology stocks.