Credit Suisse sees tech stocks rising in second half but is cautious on market short term

Published Fri, Jun 30 20173:48 PM EDTUpdated Mon, Jul 3 20177:03 AM EDT

Credit Suisse is neutral to slightly cautious on the broader market for the next three months, but remains constructive in its long-term predictions, according to its second-half outlook. The firm's analysts were most bullish on technology, industrials and health care, slightly bullish on energy and financials, and bearish on retail and consumer nondurables as fear of Amazon "incursion" continues to loom over most subsectors. Markets in the first half of 2017 have been largely positive, with the S & P 500 up 8.5 percent so far. "There are many bottoms-up drivers to the technology sector — including the iPhone Super-cycle, continued growth in Cloud, artificial intelligence, [and] autonomous driving," said Credit Suisse analysts. " [W]e continue to see the overall prospects of information technology as positive with IT substitution and penetration in the economy more likely to accelerate than moderate." Anticipation for major innovations such as the iPhone 8 and Tesla's Model 3 may boost the S & P 500's information technology sector even beyond its impressive 17 percent gain since the year began. Apple alone has jumped 25 percent this year, with Facebook and Google both up over 15 percent. Health care has been a hot topic both on Capitol Hill and on Wall Street, as Senate Republicans attempt to pass a bill to repeal and replace Obamacare under the Trump administration. "If the bill were passed," Credit Suisse said in the note, "the medical device tax, investment tax, tanning tax, Medicare Hospital Insurance surtax, the health insurance fee and tax on brand pharmaceutical manufacturers would be repealed." Health-care stocks soared last week as investors pored over the proposed legislation, but deteriorating support for the bill after the CBO's review has since stripped the sector of its gains. Alternatively, Credit Suisse set negative expectations for consumer goods. "Amazon's acquisition of Whole Foods represents a new 'front' in its retail," wrote company analysts . "We expect fundamentals and valuation to continue to deteriorate in apparel, department stores, grocery [and] packaged food." The analysts speculated over future effects in the automotive, pharmaceutical and beauty industries as online retailers continue to dominate.

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Credit Suisse is neutral to slightly cautious on the broader market for the next three months, but remains constructive in its long-term predictions, according to its second-half outlook.

The firm's analysts were most bullish on technology, industrials and health care, slightly bullish on energy and financials, and bearish on retail and consumer nondurables as fear of Amazon "incursion" continues to loom over most subsectors.

Markets in the first half of 2017 have been largely positive, with the S&P 500 up 8.5 percent so far.

"There are many bottoms-up drivers to the technology sector — including the iPhone Super-cycle, continued growth in Cloud, artificial intelligence, [and] autonomous driving," said Credit Suisse analysts. "[W]e continue to see the overall prospects of information technology as positive with IT substitution and penetration in the economy more likely to accelerate than moderate."