BANK OF AMERICA
Higher U.S. Dollar, Interest Rates and Rate Volatility Create Upside Risk
BofA Merrill Lynch Global Research today released its outlook for the markets in 2014, calling for strong U.S.-led economic growth, higher yields and solid U.S. stock gains that are lower than in 2013 but higher than consensus. Meanwhile, a rising U.S. dollar and rising rates, as well as rising rate volatility, will have consequences for markets around the world as credit cycles diverge.
At the annual BofA Merrill Lynch Year Ahead outlook news conference held today in New York, analysts summarized the macro story of the year as inherent upside risk in a vigorous bull market for the U.S. dollar and a low, but rising interest rate environment.
“In 2013, we saw the 30-year bull market in bonds wind down and stocks soar, with a stronger recovery since 2009 than in the last five market cycles,” said Candace Browning, head of BofA Merrill Lynch Global Research. “As we move into 2014, we expect this trend to moderate but continue forward even with Federal Reserve tapering mid-year.”
Bearish on rates and commodities, long on volatility and bullish on real estate and equities, the BofA Merrill Lynch team expects a shift to lower liquidity/higher growth in 2014 and overall positive asset returns. Rejecting the outright bear market case for equities, analysts remain optimistic about stock market gains in the near term as high-quality, U.S. based companies with global exposure unleash value. However, they advise to move to middle ground, shedding the extremes of high yield or high growth stocks as long-term trends in the great global rotation continue to play out.
The BofA Merrill Lynch Global Research team made the following 10 macro calls for the year ahead:
Detailed highlights of BofA Merrill Lynch Global Research reports can be found at http://newsroom.bankofamerica.com/press-kits/bofa-merrill-lynch-global-research-2014-year-ahead-outlook.
BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers nearly 3,500 stocks and over 1,100 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2013 by Institutional Investor magazine for the third consecutive year; No. 1 in the 2013 Institutional Investor All-Asia survey for the third consecutive year; No. 1 in the Institutional Investor 2013 Emerging Market & Fixed Income Survey; No. 2 in the 2013 Institutional Investor All-America survey; No. 2 in the All-Japan survey for the second consecutive year; No. 2 in the 2013 All-Latin America survey; No. 2 in the 2013 All-China survey; and No. 3 in the 2013 Institutional Investor All-Europe survey. The group was also named No. 2 in the 2013 Institutional Investor All-America Fixed Income survey for the second consecutive year and No. 3 in the 2013 All-Europe Fixed Income Research survey.
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