Investor Confidence Hits New Peak

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By Rudi Filapek-Vandyck

In case anyone is still surprised: global investor confidence has just hit a new peak. Equity strategists at Credit Suisse, home of the CS Global Risk Appetite Index, report their index has climbed to a new 20-year high. The index now shows what looks like a lonely mountain in euphoria territory with one antenna sticking out on the right hand side, reaching above everything else from an already elevated position.

Having said that, on the broker’s long-term measure of the G5, the equity to bond returns ratio is now one standard deviation below trend, meaning equities still remain cheap relative to bonds.

Credit Suisse agrees with what seems to be a ruling market view that the Federal Reserve is likely to raise US interest rates at this week’s meeting and decide it’s time for a pause from then on. However, the broker believes that this is not the end of Fed tightening and expects a resumption of US tightening at some point. Following a pause at 5%, Credit Suisse thinks a further "snugging" of US interest rates to 6% is likely throughout 2007.

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