Remember way, way back in history—Tuesday morning, to be precise—when the leader of the free world said that, given his choice, a U.S.-China trade deal wouldn’t be completed until after the November elections?
Well, never mind that. Bloomberg News reported the U.S. and China are moving closer to agreeing what tariffs would be rolled out in a phase one deal and will be able to complete a pact by the December 15 deadline, when tariffs on Chinese goods are set to increase.
Also optimistic, at least toward U.S. growth stocks, is Andrew Garthwaite, the global equity strategist at Credit Suisse. In the call of the day, he reiterates an overweight call on U.S. growth stocks, which he says can outperform even when bond yields rise.
In a note to clients, Garthwaite points out late-cycle bull markets often see a growth bubble reaching multiples of 45 to 60 times earnings. U.S. growth stocks are trading at a mere 28 times earnings. He says tech giants Microsoft MSFT, +0.36% and Alphabet GOOG, +1.95% as well as defense contractor Raytheon RTN, +0.51% are growth stocks that are cheap by its own valuation methodology, with a free cash flow yield above 3% but net debt-to-EBITDA below 2.
Garthwaite adds small-cap stocks tend to outperform when economic growth recovers, yet they’re not pricing in much of a recovery. U.K. small caps in particular look unusually cheap.
Credit Suisse has an underweight rating on low-volatility stocks, that are largely defensive.
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