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Investing.com – Bank of America (NYSE:) expects US markets to see a dramatic shift in the coming days as the bank’s indicators are about to give a buy signal.
And while the world’s largest wealth management fund, Black Rock, warns of a very volatile year, it seems that Bank of America, the second largest bank in the United States, has a different view on this proposition.
This runs counter to pessimistic expectations about the stock market, amid speculation that the world’s major economies will continue to suffer. Bank of America appears to have a different view.
Warnings of a recession are still the order of the day, buoyed by rising inflation and rising interest rates following warnings from the International Monetary Fund on the global economy.
Markets await the release of the minutes of the last monetary policy meeting in December, looking for further clues about the US Fed’s next move on interest rates and the tightening policy that the US Fed initiated last year.
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Reason for optimism
Where Bank of America strategists said in a recent research note that one of the bank’s leading indicators gives cause for optimism about the US stock market’s performance outlook.
And Bank of America is the second largest bank in the United States after JPMorgan (NYSE:) Chase, and has one of the strongest research arms in the world.
time of purchase
The Bank of America Sell Side Index, which tracks average allocations recommended by the equity strategist, is nearing a buy signal, according to a Bank of America note.
The bank’s strategists said, “This fits within the framework of the bank’s vision to achieve” a 16% increase in 2023.
And the American investment bank said in a research note that historically, when the index was at this level or below, the following 12 months have brought positive returns of 95%.
Interestingly, the US stock market had its worst annual performance in 2022 since 2008, with fears of a recession and a sharp rise in interest rates.
16% increase.
Bank of America experts say the S&P 500 could return 16% higher in 2023 in 2023 as the index sends bullish signals, according to the note.
According to bank staff, the BofA’s sell-side indicator is approaching a buy signal, as Wall Street sentiment remains bearish on stocks.
As Wall Street still carries a mix of bearish sentiments, one of Bank of America’s leading indicators gives cause for optimism, according to Bank of America pundits, as markets are approaching the sell-off point and shifting direction.
The cuff tends to bind
Bank of America’s survey of fund managers revealed that investors’ relative position in stocks versus bonds is at its lowest level since 2009.
According to the bank’s survey, the recommended average allocation to stocks fell by 6 percentage points and the S&P 500 was down more than 19%.
Meanwhile, the recommended average allocation to bonds increased by 6 percentage points to 34%, bringing the recommended allocation from stocks to bonds to its lowest level since 2016, according to Bank of America.
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2023
Bank of America analysts said investors’ bias towards bonds during the recent crisis and abandonment of equities prompted markets to near the nadir amid expectations of a trend correction, which prompted them to be constructive about your actions for the new year .
Bank of America analysts noted that they recommended underweighting stocks during the bull market of the 1980s and 1990s, as well as the 2009-2020 bull market.
Contrasting view
BlackRock, the world’s largest fund manager, had expected the new year 2023 to be very volatile in equity and commodity markets, given the continued tensions and stormy conditions that hit the global economy during 2022.
BlackRock analysts said financial markets are still facing a storm of macroeconomic pressures after the U.S. stock market posted its biggest annual decline since 2008 last year.
Kristalina Georgieva, managing director of the International Monetary Fund, said in an interview that the global economy is facing a difficult year and that a third of the economy is expected to experience a recession.
He added that the US, Europe and China – the main engines of global growth – are all slowing at the same time, making 2023 more difficult than 2022 for the global economy.
