Finally, there’s the undeniable appeal of a company overflowing with cash, a tasty target for a campaign to initiate share buybacks or increase dividend payments. Which metric works best in identifying balance sheets that are attractive to activists? The ratio of a company’s total cash relative to its market capitalization. The higher that ratio relative to one’s peers, the more likely a company is to garner unwanted attention. When ValueAct Capital scored a seat on Microsoft’s board of directors in 2013, the company’s 77 billion dollars cash balance gave it a cash-to-market cap ratio more than double that of the industry median.
A Satisfying Meal
Taken together, all three factors – valuation, operational performance, and cash on the balance sheet – serve well to anticipate activist attention. The factors this paper identifies as important to activists are 76 percent more likely to identify a target of activists than random chance. Coming at it from the other direction, companies with strong operating performance, healthy valuations, and disciplined capital employment are less likely to become activist targets than those without them. "Like most disruptions in the marketplace," concludes the paper, "it all comes back to value creation in the end.

Activist investors have been living up to their name in recent years, waging campaigns against an increasingly diverse array of companies of all shapes and sizes. The number of activist campaigns more than quadrupled from 104 in 2000 to 487 in 2015 and, according to the Financial Times, more than 40 percent of the 500 largest public companies in the United States attracted activist attention between 2009 and 2015. Assets under activist management have been growing at nearly 20 percent a year for more than a decade and the category now collectively controls more than $123 billion. And while shareholder activism has historically been an American phenomenon, it’s starting to spread to other developed equity markets in the Americas, as well as Asia and Europe.
 
What do activists look for when choosing their quarry? The answer isn’t immediately obvious, as campaigns have targeted companies that are very different from one another across a broad swath of industries. But after analyzing more than 3,000 campaigns, the paper’s authors, Chris Young (Contested Situations within M&A) and Rick Faery (HOLT Corporate Advisory), found that three factors have a statistically significant relationship with activist intervention: valuation, operating performance, and excess cash.
 
Low valuations have always set activist mouths watering.

The probability of Republican Donald Trump winning the U.S. presidential election on November 8 seems remote at the moment—economists on Credit Suisse’s Global Markets team put it at less than 10 percent. So if it did happen, it would come as a major surprise for financial markets. The last time that kind of seemingly low-likelihood event came to pass—during last June’s Brexit vote—most investors were caught wrong-footed. So how might they best prepare for something as unexpected as President Donald Trump?
 
Credit Suisse’s U.S. equities strategists note that volatility would likely swing higher if Trump wins—or even if polls swing in his direction ahead of the election. Of course, that kind of thing usually happens when the White House changes hands from one political party to another. The CBOE Volatility Index (VIX) shot up the last three times it happened—in September and October of 1992, 2000, and 2008. In 1992, the VIX spiked to 21 in early October, and the S&P 500 fell 5.3 percent from a September peak to an October trough. The equities strategists believe better Trump polling data could send the volatility index up between 20 and 30 from 13 on October 4.
 
Because Trump’s campaign has been light on policy details, his presidency would introduce significant uncertainty to financial markets.

It’s hard to pick up a newspaper these days without reading yet another story about yet another crisis somewhere in Europe, whether it’s tensions between Ukraine and Russia, the recurring threat of Grexit, banking sector stress, or political uncertainty in Portugal and Spain. Those are the headlines. Remarkably, none has come close to derailing the ongoing regional economic recovery that’s now well into its third year. Even after the Brexit vote shocked financial markets, cyclical indicators such as the purchasing managers index held steady. Economists on Credit Suisse’s Global Markets team attribute the unshakeable nature of the recovery to its roots in strengthening domestic demand—and for the time being, that bodes well for European equities.
 
For the last two years, falling oil prices and improving labor market conditions helped buoy European household spending. Now that oil prices have stabilized, cheap energy is contributing less than it once did to domestic demand growth, but employment trends are still going strong. While unemployment is still relatively high in the euro area at 10.1 percent, it’s been on a steady downward march since hitting 12.1 percent in June 2013. Meanwhile, auto and retail sales have been growing at a healthy pace of 2.9 percent a year, and domestic demand has risen as a share of overall demand since the end of the region’s recession in 2013.

What politicians say and what presidents do often have little to do with one another. U.S. President Franklin D. Roosevelt, for example, implemented the New Deal a year after the Democratic Party pledged to slash government spending. Still, with the U.S. presidential election fast approaching, the economists on Credit Suisse’s Global Markets team analyzed the campaign promises made to date in the hope of giving investors some sense of what the future might hold.
 
They determined that if Hillary Clinton becomes the first female president, neither the direction of policy nor political dynamics in Washington would change much. A win for Donald Trump, on the other hand, would result in high levels of policy uncertainty, and the potential for “significant long-term costs and externalities” as a result of his promises to lessen regulations in industries such as energy and finance.
 
The Global Markets team puts the probability of a Trump win at less than 10 percent. As is often the case, the election seems destined to hinge on swing states such as Florida and Ohio, where local polls show Clinton in the lead. Still, because the potential disturbance to the status quo from a Trump victory is so high, the possibility is well worth considering.

There are numerous reasons to be optimistic about global equities in the coming year. Capital is plentiful; central banks in Europe, the United Kingdom, and some Asian economies have an easing bias; and the equity strategists on Credit Suisse’s Global Markets team believe the equity risk premium is higher than warranted. But there are risks, too, including heightened political risk, slowing Chinese growth, and threats to existing business models from technological disruption and Chinese overinvestment. The net result: the Bank’s Global Markets strategists maintain only a benchmark weighting on global equities.
 
But not all equities are created equal. Heading into the final four months of 2016, the Bank’s strategists have identified three investment styles that they believe offer the best opportunities within the asset class. For those looking for stocks that will perform well in either a bull market or a bear market, there are high-quality growth stocks. Value investors can look to “exceptionally cheap” high-beta stocks, while income investors should take a look at those reliable dividend-payers that Credit Suisse calls “dividend aristocrats.”
 
Quality Growth Stocks
 
European growth stocks have outperformed the market by 1 percent so far in 2016, while U.S. growth stocks underperformed by the same amount.

In their golden fields in Italy’s Piedmont region, winemakers Renato and Milva Giacone Fenocchio do things they way they were done in simpler times. They forego chemical pesticides and herbicides, pick their grapes by hand, and eschew fancy machinery that can alter a wine during and after fermentation. And they’ve been doing so since 2001, long before organic and sustainable farming were anything like the buzzwords they are today.
 
The Fenocchios produce about 28,000 bottles of Dolcetto d’Alba, Barbera d’Alba, Nebbiolo, and Barbaresco wines each year, 90 percent of which are exported to loyal customers in the United States and Europe. “Sustainable agriculture is becoming important for everyone,” says Milva.
 
To keep molds and pests at bay, the Fenocchios use copper-based products to prevent downy mildew from forming on their grapes and sulphur-based products to keep away powdery mildew, but in very small amounts and only as necessary depending on temperature and humidity, both of which can make plants more prone to disease. Copper and sulphur, which are found naturally in soil, are alternatives to the harsher, synthetic chemical products that non-organic producers use.

What’s next for Japanese corporate earnings? Well, that depends. Consider the April-to-June Japanese earnings season, which can be considered a pleasant surprise or a bleak portend based on which numbers you choose to accentuate. Where you stand on Japan depends on where you sit.
 
The quarter was a winner in terms of performance relative to past expectations. Japanese companies beat consensus estimates for both operating and net profits by 11 percent, and twice as many companies beat consensus estimates by at least 10 percent as missed by the same margin. Future expectations, on the other hand, look gloomy. Japanese companies reduced their full-year operating and net profit outlooks by 1.5 percent—and twice as many companies cut operating profit guidance as raised it. Even more troubling, most of the companies that lowered their guidance did so based on assumptions that the yen would trade at ¥105 to the dollar over the course of the year. As of late-August, however, it was trading at ¥103 to the dollar, raising the prospect that export-oriented companies perform worse than expected.
 
Over the last three years, Japanese firms led the world in the proportion of analysts revising their earnings estimates higher. More Japanese firms—61 percent—have seen their earnings expectations reduced over the last 13 weeks than in any other regional market.

It went down to the wire, but the stadiums are complete, the brand-new metro line is up and running, and the 2016 Olympic Games in Rio de Janeiro are officially underway. When it comes to the Brazilian economy, on the other hand, there is still more work to be done. While there has been some progress in resolving the political uncertainty dogging the country, the fiscal consolidation that needs to happen for the sake of Brazil’s longer-term economic health still seems to be far off.

Legislators won’t vote on the matter until the end of August, but President Dilma Rousseff’s temporary replacement, Vice President Michael Temer, has already replaced the entire presidential cabinet and installed a new economic team. And that, say Brazil economists on Credit Suisse’s Global Markets team, has been enough to buoy business and consumer confidence.

Partly as a result of the newfound confidence, the Bank’s economists have increased their forecast for 2016 GDP growth from -4.2 percent to -3.5 percent, with a return to positive growth expected in 2017. Still, with government spending rising and tax revenues in decline, Credit Suisse’s economists are predicting a 2016 primary deficit (not counting interest payments) of 1.9 percent of GDP. If no fiscal reforms are passed, the deficit could reach 2.6 percent of GDP in 2017.

Interest rates in developed economies have been declining for the past 40 years. At this point, 60 percent of global GDP is generated in countries that have negative or near-zero interest rates. Germany and Switzerland have both issued bonds that yield negative returns to investors, and a handful of European corporations have done the same. The yield curve has also flattened significantly in recent years, making long-term debt relatively more affordable. In other words, it’s cheaper than ever to borrow long-term capital in both Europe and the United States.
 
In theory, the fact that their deposits are earning nothing or next-to-nothing in the bank should make businesses eager to borrow money to invest in research and development and make capital expenditures that stand to boost their long-term growth prospects. It hasn’t. A new white paper from Credit Suisse’s HOLT® Corporate Advisory team shows that corporate spending on both capital expenditures and R&D as a proportion of sales has been declining since the early 1990s. Even more baffling: such spending apparently has no correlation with changes in 10-year government bond yields – a proxy for prevailing interest rates – in either Europe or the United States.
 
There are several possible explanations for the lack of corporate investment in a world of negative rates.

Japanese central bankers are not in an enviable position. The year-over-year growth rate of the country’s core consumer price index was -0.4 percent in May, marking the third consecutive monthly decline—and this after three years of Abenomics.
 
Brexit certainly hasn’t helped. The yen has strengthened from ¥121 to the dollar in February 2016 to ¥105 in late July. That’s had the effect of reducing import prices, but it has also put downward pressure on inflation. Japan economists on Credit Suisse’s Global Markets team believe it would have to weaken to ¥140 for headline inflation to reach 0.5 percent. But that’s unlikely. Given the post-Brexit volatility in financial markets and the yen’s status as a safe-haven currency, Global Markets foreign exchange analysts expect the currency to go the other direction, strengthening to ¥100 over the next three months and ¥95 in the next 12 months.
 
Other deflationary forces are homegrown, in particular the country’s inability to address the many demographic forces that are working against inflation. Whatever the causes of the problem, mind you, Credit Suisse believes the conclusion is the same: Having failed to raise inflation expectations with negative interest rates, the Bank of Japan needs to take more drastic measures to lift the island nation out of its deflationary state.

And so it begins. Even before the Brexit vote, corporate profits in the U.K. were already under pressure from a combination of sluggish global growth and rising wages. But now, several weeks after referendum, business confidence in the U.K. is officially cratering. Credit Suisse’s Global Markets team expects corporate pessimism to ultimately translate into reduced investment and hiring, and the combination of rising unemployment and a weaker pound to squeeze household income. With uncertainty high and optimism in short supply, the Global Markets economists foresee a recession beginning in the second half of 2016, and continued through 2017, during which they project a 1 percent decline in GDP.
 
Even setting aside the dramatic decline in sentiment in the wake of the referendum, the mere possibility of leaving the European Union was weighing on both British economic activity and corporate sentiment long before the June 23 vote. Economic growth fell from 0.7 percent in the fourth quarter of 2015 to 0.4 percent in the first quarter of 2016, and growth may have slipped further to 0.2 percent in the second quarter.
 
In May, a proprietary Credit Suisse survey of global executives showed that 40 percent of firms were postponing or cutting corporate spending in the U.K. in case British voters chose to leave the EU.

The Federal Reserve is expected to keep monetary policy unchanged over the next few months as the central bank continues to assess the underlying strength of the U.S. economy, especially after the Brexit vote raised concerns that a potential slowdown in the U.K. economy could have a significant spillover effect globally.
 
Credit Suisse’s Global Markets team believes that the vote has, in fact, exacerbated some tendencies within the Fed that were in place long before Britain’s June 23 vote to leave the European Union. The team has argued that a deep concern about both economic and market volatility has kept the Fed from raising rates, even as U.S. employment and inflation data have shown consistent improvement. It now believes that U.S. rates will remain at current levels until May 2017.
 
After two decades of declining GDP volatility, the housing bubble marked a return to large swings in economic growth. But when the bubble burst in 2008, the level of cash flow disruptions and financial instability were greater than the relatively small variation in GDP from boom to bust should have warranted from a historical perspective, the Global Markets team notes, likely because the U.S. financial system is currently more sensitive to sharp changes in GDP growth than it used to be due to the rise of shadow banking and globalization.

Quick: Name the Asian country whose cheap labor costs have attracted droves of foreign manufacturers, driving an explosion in export-driven economic activity that is now transitioning to more moderate, consumer-based growth. Did you say China? Vietnam would have been correct, too.

As labor costs have risen dramatically in China over the last several years, a growing number of manufacturers have moved operations from the Middle Kingdom to Vietnam or even decided to set up shop there in the first place. Vietnam’s growing popularity as a global manufacturing hub is one of the reasons Credit Suisse expects the country’s GDP to rise 6.3 percent next year, the third-fastest rate of growth in emerging market economies after China (6.6 percent) and India (7.8 percent). Even that relatively strong growth rate is a step down from the 6.7 percent growth rate of 2015, however, thanks to sluggish global growth. Still, even as Vietnamese exports slow, Credit Suisse analysts note that burgeoning domestic consumption is helping sustain economic expansion – a growth pattern the bank’s analysts call “slower, but safer.”

Vietnamese exports grew at a staggering pace at the beginning of the decade, peaking at 34.2 percent growth in 2011. That growth has slowed gradually since, alongside China’s declining appetite for imports. (Exports to China amount to about 5.

Investing in companies such as Facebook before they went public has proven very lucrative for many well-connected investors – and Facebook’s decision to stay private for eight years before going public certainly worked out well for the social media giant. Bill Gurley, a general partner at venture capital firm Benchmark Capital, believes that early success stories such as Facebook and many other high-flying technology companies have made it fashionable for CEOs to resist public offerings. Investors who get in early certainly have no complaints. And without the pressure of quarterly earnings announcements, CEOs claim they’re able to focus on long-term growth. Everybody wins. Or do they?
 
From investors’ perspective, the fear of missing out on the next big thing and a low interest-rate environment that makes other investments challenging is enough to keep their money flowing into private companies even when they know an exit could be a long way off, if it comes at all. That’s what’s led us into the age of unicorns – private companies valued at $1 billion or more. While Microsoft was valued at $778 million and Cisco at $224 million when they went public in 1986 and 1990, Google waited until it was worth $27.2 billion to IPO in 2004, and Facebook was worth $100 billion at its 2012 stock market debut. In February 2015, Fortune magazine identified 80 unicorns.

Do you trust software to make decisions for you? Would you trust it if you’d written the software yourself? Consider the case of Cade Massey, a professor at University of Pennsylvania’s Wharton School, and Rufus Peabody, a former student and professional sports gambler. Together, the two men have built a well-known system for predicting the outcomes of college and professional football games known as the Massey-Peabody rankings. Their picks rely purely on statistics – except the one day they chose to ignore the system. They shouldn’t have.
 
In October 2013, the University of Texas was due to play its rival, the University of Oklahoma. With Oklahoma beating Texas by an average of 40 points in the two preceding years, the line in Las Vegas pointed to a 14-point win for Oklahoma. The Massey-Peabody model, on the other hand, foresaw a less dramatic win – nine or 10 points instead of 14. Massey, a Texan, was familiar with his team’s capacity for heartbreak and insisted for the first time ever on overriding the system. But then the Longhorns won, 36 to 20.
 
Massey’s mistake illustrates a tendency that is becoming more relevant in the digital age, when algorithms recommend the books people buy, find the fastest routes through traffic, and tailor the stories users see on their social media feeds.

The shock of Great Britain’s vote to leave the European Union has already thrown global financial markets into disarray and cost Prime Minister David Cameron his job, but it will take years before the geopolitical impact of the Brexit referendum fully materializes. The political uncertainty generated by the “Leave” vote will reach far beyond 10 Downing Street, potentially into Scotland, Northern Ireland, Eurozone capitals, and beyond. It may even mark the beginning of the end of globalization itself.

In Britain, choosing Cameron’s successor will be the first order of business. Cameron has said he wants a new prime minister in place by the Conservative Party’s conference in September. In any event, Credit Suisse’s Global Markets team say that after such a divisive campaign, the country’s next leader will likely find themselves leading an unstable government with a small majority in the House of Commons. He or she might even be vulnerable to losing a vote of no confidence, according to Neville Hill, co-head of Credit Suisse’s Global Economics and Fixed Income Strategy group. And it’s not just the Tories facing fractiousness within their ranks: The Labor party passed a non-binding vote of no confidence in leader Jeremy Corbyn, following a flurry of resignations from the shadow cabinet in the days after the Brexit vote.

To say that the Brexit vote on June 23 took financial markets by surprise would be an understatement. The pound, British stocks, and Gilt yields had all risen sharply in the week leading up to the vote, only to crash once the results started coming in. Broadly speaking, strategists on Credit Suisse’s Global Markets and Investment Solutions and Products (IS&P) teams expect markets to remain volatile in the coming days and for investors to prefer safe assets to risky ones. Below, we highlight views from across the bank on how Britain’s referendum vote to leave the European Union is likely to affect both the British and European economies, as well as a broad spectrum of financial assets.
 
Economic Impact
 
Both Credit Suisse’s Global Markets and IS&P teams believe that the Brexit vote will create considerable uncertainty for British businesses that will ultimately lead to a decline in GDP – and both teams also believe that the Bank of England will step in with rate cuts. The Global Markets team expects the Bank of England to cut rates from 0.5 percent to 0.05 percent and implement another round of quantitative easing to the tune of £75 billion no later than August 2016.

Do you trust software to make decisions for you? Would you trust it if you’d written the software yourself? Consider the case of Cade Massey, a professor at University of Pennsylvania’s Wharton School, and Rufus Peabody, a former student and professional sports gambler. Together, the two men have built a well-known system for predicting the outcomes of college and professional football games known as the Massey-Peabody rankings. Their picks rely purely on statistics – except the one day they chose to ignore the system. They shouldn’t have.
 
In October 2013, the University of Texas was due to play its rival, the University of Oklahoma. With Oklahoma beating Texas by an average of 40 points in the two preceding years, the line in Las Vegas pointed to a 14-point win for Oklahoma. The Massey-Peabody model, on the other hand, foresaw a less dramatic win – nine or 10 points instead of 14. Massey, a Texan, was familiar with his team’s capacity for heartbreak and insisted for the first time ever on overriding the system. But then the Longhorns won, 36 to 20.
 
Massey’s mistake illustrates a tendency that is becoming more relevant in the digital age, when algorithms recommend the books people buy, find the fastest routes through traffic, and tailor the stories users see on their social media feeds.

Investing in companies such as Facebook before they went public has proven very lucrative for many well-connected investors – and Facebook’s decision to stay private for eight years before going public certainly worked out well for the social media giant. Bill Gurley, a general partner at venture capital firm Benchmark Capital, believes that early success stories such as Facebook and many other high-flying technology companies have made it fashionable for CEOs to resist public offerings. Investors who get in early certainly have no complaints. And without the pressure of quarterly earnings announcements, CEOs claim they’re able to focus on long-term growth. Everybody wins. Or do they?
 
From investors’ perspective, the fear of missing out on the next big thing and a low interest-rate environment that makes other investments challenging is enough to keep their money flowing into private companies even when they know an exit could be a long way off, if it comes at all. That’s what’s led us into the age of unicorns – private companies valued at $1 billion or more. While Microsoft was valued at $778 million and Cisco at $224 million when they went public in 1986 and 1990, Google waited until it was worth $27.2 billion to IPO in 2004, and Facebook was worth $100 billion at its 2012 stock market debut. In February 2015, Fortune magazine identified 80 unicorns.

On June 8, the price of Brent crude ticked above $50 a barrel for the first time since August 2015. But the new $50-plus era came to an end two days later, amid a broader selloff that affected multiple asset classes. Energy analysts with Credit Suisse’s Global Markets team point out, however, that both supply (which is shrinking) and demand (which is growing steadily) point to firming oil prices ahead. Indeed, the bank’s analysts think that after two years of oversupply, the crude oil market is finally showing signs of rebalancing.
 
The supply side of the oil equation has gotten the lion’s share of recent attention. Data from the U.S. Energy Information Administration showed that crude oil inventories decreased by 933,000 barrels to 1.226 million as of June 15, the fourth weekly decline in a row. Credit Suisse’s energy analysts expect total U.S. liquids production to decline by another 460,000 barrels per day in 2016 compared to 2015.
 
The biggest upside risk to supply was Saudi Arabia, the world’s largest oil producer, but the country is now signaling that it is not interested in flooding the market with additional barrels of crude oil. The Kingdom tried and failed in early June to convince its fellow members of the Organization of Petroleum Exporting Countries to agree to a production ceiling, and has since vowed to maintain production capacity at 12.

Paper, gunpowder, the compass – China has a history of disruption that extends back thousands of years. In the digital age, however, the Middle Kingdom’s technology startups gained a reputation for quickly copying their Western peers, rather than coming up with their own world-changing ideas. All that is changing, though, and in 2016, innovation itself is increasingly being “Made in China”. China’s Internet giants are coming up with ingenious homegrown products, services, and business models, a second wave of highly successful tech innovators is emerging, and a multitude of hungry, creative startup founders are hot on their heels.
 
That’s a good thing, too, because these days, proof of innovation isn’t just a bragging right in China – it’s a necessity. The McKinsey Global Institute estimates that two to three percentage points of GDP growth will have to come from innovation, as measured by gains in multifactor productivity, for China’s economy to grow between 5.5 percent and 6.5 percent a year for the next decade. The push is well under way: China leads the world in patent filings and engineering graduates, and is the world’s second-highest spender on research and development. The government is supporting startups through venture capital, government-sponsored incubators, and state-run universities.

The headline data out of China hasn’t exactly been comforting of late. The country is grappling with the challenges of slowing GDP growth, rising debt levels, and volatile stock markets, to name just a few. But if the macroeconomic statistics seem bleak, the picture is brighter among the country’s entrepreneurial class. The quality of Chinese innovation is increasing, the funding environment is improving, particularly for early-stage companies, and the Chinese government is doing everything it can to make China Inc. a force to be reckoned with.
 
It should come as no surprise that a large portion of recent Chinese startups is aimed squarely at the country’s rapidly expanding middle class. The number of middle-class adults in China has grown by more than half since 2000, to a total of 109 million, more than the 105 million in all of North America, according to Credit Suisse’s 2015 Global Wealth Report. And their spending power has increased even more: Middle-class wealth jumped more than seven-fold during that time, from $1.7 trillion to $7.3 trillion. What Chinese people eat, drink, and wear, where they travel, and what they do for entertainment “will be the driving force of consumption in the next decade,” Michelle Leung, founder and CEO of Xingtai Capital Management, said at Credit Suisse’s 2016 Asian Investment Conference (AIC) in April.

This might surprise you: In the majority of U.S. states – 29 out of 50 – it’s legal for companies to discriminate against their lesbian, gay, bisexual, and transgender (LGBT) employees. But this probably won’t: Research by Credit Suisse suggests that companies that choose to do so – whether subtly or overtly – are likely doing a disservice both to their business and to their shareholders. Over the past six years, companies that created welcoming environments for LGBT employees handily outperformed the broader market.
 
Credit Suisse analysts created a basket of 270 companies that have openly LGBT leaders and senior management, employees who are members of local LGBT business networks, or that have been voted top employers by activist groups such as Stonewall or DiversityInc. While almost every Fortune 500 company has a non-discrimination policy, Credit Suisse’s criteria required strong signals of genuine inclusion, rather than mere tolerance.
 
The LGBT 270 index included companies in all sectors, but information technology, consumer staples, and financial firms made up some 60 percent of the index by market cap. The index outperformed the MSCI All Country World Index by 3 percentage points a year over the past six years, producing average annual returns of 6.4 percent. Also, companies in the LGBT 270 fell just 5.1 percent over the last 12 months, compared to a 6.

What’s a company worth? Seasoned investors know that finding the answer to that question is more art than science. One way to do so is from the bottom up, to calculate a firm’s intrinsic value using a discounted cash flow methodology. The other is to come at the question from the top down, by using a relative valuation approach via market multiples. While there are many types of multiples, each reflects the market’s evaluation of a company’s expected operational performance, and can be used to cut across times, sectors, and markets.
 
Investor expectations about future revenue growth and profitability both play a key role in driving multiples. Investors obviously prefer high levels of both. But if there’s only one to be had, which combination do investors value more highly? Superior growth and low profitability? Or lower growth and high profitability? Credit Suisse recently analyzed the performance and multiples of companies with market capitalizations of more than $1 billion (excluding financial firms and utilities) between 2004 and 2015, to find out.
 
Not surprisingly, the bank found that companies with above-median projected growth in revenue and above-median projected profitability traded at an 11.5x EV/EBITDA multiple, compared to just 7.5x for firms with below-median estimates for future revenue growth and profitability.

When Denmark introduced negative interest rates in 2012, it was a pioneer. But the policy has become such an accepted part of central banks’ toolbox in the years since that financial pundits hardly batted an eyelash when Hungary became the world’s sixth central bank to introduce negative rates in March 2016. As the practice becomes more widespread, the question of how low interest rates can go has become increasingly relevant for investors.
 
While every country (or region, in the case of the Eurozone) has implemented negative rates slightly differently to fit their individual needs, the fundamental mechanism is largely the same: In one way or another, commercial banks are charged interest (rather than paid interest) for keeping money on deposit with the central bank. In Europe and Japan, the largest economies to introduce negative rates, those charges are applied only to excess reserves. (Most banks are required to keep a minimum amount of reserves on hand at the central bank, and any additional cash beyond that is called excess reserves.)
 

 
Negative rates have raised concerns about bank profitability in several economies where they have been introduced. One reason is that most commercial banks have been reluctant to pass the cost of negative rates onto consumers by charging retail customers interest on their deposits.

Online sales juggernaut Amazon has a toe in the Internet finance business, processing payments and offering loans to the site’s merchants. What about its Chinese counterpart, Alibaba? It does those things, too. It also facilitates peer-to-peer lending, sells mutual funds and insurance policies, and has formed a private bank to lend to consumers. Who’s leading the Internet revolution now?
 
From a modest start in processing online payments, Alibaba, online media and entertainment firm Tencent, and search giant Baidu have all branched out into a vast array of financial services and products. And as online finance is becoming a more important part of their business models, they are presenting increasingly stiff competition for the country’s traditional financial institutions.
 
Credit Suisse estimates that online finance adds 8 percent to Alibaba’s fair value— and a full 14 percent to Tencent’s — with both percentages expected to increase. The bank’s analysts expect that over the next three years, the three Internet giants will increase their share of the online payment market from 78 percent to 84 percent, their share of the financing market from 8 percent to 16 percent, and their share of the country’s wealth management product sales from 5 percent to 6 percent.

Quick: Name the Asian country whose cheap labor costs have attracted droves of foreign manufacturers, driving an explosion in export-driven economic activity that is now transitioning to more moderate, consumer-based growth. Did you say China? Vietnam would have been correct, too.
 
As labor costs have risen dramatically in China over the last several years, a growing number of manufacturers have moved operations from the Middle Kingdom to Vietnam or even decided to set up shop there in the first place. Vietnam’s growing popularity as a global manufacturing hub is one of the reasons Credit Suisse expects the country’s GDP to rise 6.3 percent next year, the third-fastest rate of growth in emerging market economies after China (6.6 percent) and India (7.8 percent). Even that relatively strong growth rate is a step down from the 6.7 percent growth rate of 2015, however, thanks to sluggish global growth. Still, even as Vietnamese exports slow, Credit Suisse analysts note that burgeoning domestic consumption is helping sustain economic expansion – a growth pattern the bank’s analysts call “slower, but safer.”
 
Vietnamese exports grew at a staggering pace at the beginning of the decade, peaking at 34.2 percent growth in 2011. That growth has slowed gradually since, alongside China’s declining appetite for imports. (Exports to China amount to about 5.5 percent of Vietnamese GDP.

For several years, the United States has been the bright spot in the world economy, with the strongest growth recovery among developed nations, sustained labor market improvement, and climbing stock markets. But that’s the past. What about the future? From the perspective of senior European executives, the outlook for the U.S. market has become increasingly worrisome of late. In the most recent installment of a twice-yearly survey, a panel of those executives told Credit Suisse that their outlook for the U.S. has declined more than for any other region.
 
In the March 2016 edition of the Credit Suisse Executive Panel, weakness in the economies and capital markets of China and other Asian nations was still the top worry for 38.5 percent of executives. But that’s down considerably from 57.8 percent in October. The percentage of those worried about the U.S. economy and rising interest rates, on the other hand, was moving in the other direction, rising from 19 percent in October to 29 percent in March. More executives voiced concern about U.S than did about Russia or further devaluation of the Chinese renminbi and other emerging market currencies.
 
The net percentage of executives who believe corporate spending will increase in the U.S. over the next six months was 16.9 percent. That’s a stronger result than anywhere in Europe, but also represents a significant decline of 11.

Even in the fast-changing world of foreign exchange, investors have been able to count on one thing for the last two years – that the interest rate policies of central banks would be the primary driver of currency movements. The so-called divergence trade hinged on the Federal Reserve’s tightening bias relative to the easing bias of the European Central Bank and Bank of Japan and was a fairly reliable organizing principle for foreign-exchange investors. On a trade-weighted basis, the greenback strengthened some 19.3 percent between mid-2014 and January 2016.
 
Just a few months after the Federal Reserve’s first interest rate hike in nine years, however, the rule has been flipped on its head. With the Bank of Japan and European Central Bank still in easing mode, Credit Suisse’s foreign exchange analysts are actually calling for the dollar to weaken against the euro over the next three months, and against the yen and currencies in non-Japan Asia, Eastern Europe, the Middle East, and Africa over the coming year. On a trade-weighted basis, Credit Suisse expects the dollar to decline 1 percent in the next three months.
 
Part of the reason for the recent dollar slump – the greenback is down 4.