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Capital Market Outlook
Your resource for the latest thinking from our experts on the markets and economy in the coming year and beyond
Corporate America and Globalization: Ten Facts
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Globalization remains hugely important to U.S. firms and long-term investment returns. In our view, 2022 will be dominated by major shifts in the investment terrain; and the transition to green energy will be measured in decades, not years. |
An Equity Culture is Building—and it's a Positive for the Secular Bull Market
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The increased participation of individual investors could shape market trends moving forward. Plus supply may continue to lag demand, keeping upside pressure on inflation, and investors have the potential to play a crucial role in the shift to a more sustainable planet. |
What the Political Tea Leaves Portend for the Markets
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According to recent polling data, there could be a challenging political backdrop heading into 2022 but based on history, markets don't mind a divided government. Plus nominal gross domestic product growth has reaccelerated, and a key reason we prefer U.S. Equities to Emerging Markets. |
Energy Supply Uncertainty Rising
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Risks of chronic energy shortages and higher prices are growing. Plus rising bond volatility portends higher equity volatility, and a $4.5 trillion trifecta from U.S. consumers, U.S. corporations and the U.S. federal government represents future spending into 2022. |
Inflation Expectations at Risk of Coming Loose
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The rise in inflation is starting to affect longer-term inflation expectations; severe stress in the global energy system may call the green transition into question; investors may be starting to believe the rise in consumer prices could be higher and more persistent than expected. |
Reflation Still Shaping Relative Performance
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It is our view that a series of conditions appears to be forming that should support Value-oriented areas of the global equity markets. Also, after some mid-year consolidation of large earlier gains, a year-end rally is being led by reflation beneficiaries, and a less discussed potential risk is market concentration. |
The Global Energy Crunch
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Yes, the robots are coming and not a minute too soon. Plus strong demand and tight global supplies are currently driving energy prices higher, and stalling sentiment indicates equity upside. |
Approving Fiscal Boosters
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We look at recent geostrategic chess moves and the implications for investors. Plus market yields seem to agree that monetary policies will likely remain supportive of growth for some time, and an increased emphasis on fiscal treatments brings significant implications for the business cycle and portfolio positioning. |
Economic Policy Turbulence Ahead
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While fiscal policy has a great deal of near-term uncertainty, monetary policy is the more important piece to watch for tactical and strategic asset allocation decisions. Plus, many foreign investors have placed their faith on U.S. assets; and it's not all gloom and doom on the U.S. global earnings front. |
Supply-Chain Strains Reflect A Rapidly Changing Economy
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The speed, scale and scope of the government-led Energy sector transformation suggest more supply discontinuities should not be surprising ahead. Plus investing in an “everything expensive" market, and the rise of retail traders is contributing to the current secular bull market. |
Strong U.S. Capex Outlook
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Selected areas of emerging markets may present opportunities, but nearer-term challenges keep us tactically neutral. Plus investment growth is likely to remain strong to expand supply capacity and ease shortages, and it's a good time for a reminder about the perils of market timing. |
Investing for High Inflation
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A variety of emerging macroeconomic risks should be monitored by investors as we head into the end of the year. Plus investing for high inflation, and one thing not in short supply is cash. |
How Durable Are Record-High Margins?
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Investors should watch closely for signs of a budding peak in corporate profit margins. U.S.-China relations: Breaking up is hard to do—a bullish prospect for U.S. investors. What could Federal Reserve tapering mean for equity markets? |
Supply Chains, Inventories and Inflation
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Trends from around the world show supply chain bottlenecks have been holding back global growth; the next wave of the digital revolution will help to provide a significant shift up in real gross domestic product and productivity growth; consumer strength is moderating. |
Time to Taper
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With demand for labor exceeding supply by a widening margin, it may be time for the Fed to taper; key drivers for asset prices should include economic resilience and inflation; Senate one step closer to budget resolution. |
Extended Strong Manufacturing Cycle Likely Ahead
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In our view, the stage is set for the next leg up in global cyclical, value trade. Recent regulatory measures have made for a prolonged period of volatility in Chinese equity markets. The gaming and tech industries have breathed new life into the Metaverse concept, a virtual environment you can "plug into" via virtual reality. |
Macro In Brief
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The U.S. economy is currently in the early stages of a transition from an unprecedented policy-induced boom to a private sector-fueled, stronger-for-longer economic expansion. Plus considerations for positioning portfolios from the U.S. infrastructure bill, and an update on Q2 earnings. |
Macro In Brief
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Current economic data is positive for risk assets, for now, but business cycle risks are building. Plus the pressure’s on emerging market central banks, and just as China’s crackdown of its technology sector broadened out, many U.S. Mega-cap tech names hovered near highs. |
Too Much of a Good Thing
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Higher inflation will likely remain persistent rather than transitory. The pandemic disruption to supply chains has served as a flashpoint in evaluating vulnerabilities and fragilities across a number of industries. And we believe we are on the road to a more decarbonized future. |
Stronger for Longer
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The cyclical and Value beneficiaries of currently strong economic growth tend to reassert their leadership until monetary policy actually turns restrictive. Plus we favor a more active approach to emerging markets, and small caps are off to a strong start in 2021, and in our view, momentum could continue. |
Oil-Price Forecasts Run the Gamut
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Uncertainty, long-term supply restraints, and unprecedented monetary liquidity are adding further upside bias to oil prices. Plus The Art of Investing in China: “Crossing the River by Feeling the Stones," and assessing climate risks relies on good disclosure. |
Macro Moderations and Market Transitions
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The market's drivers are likely to transition toward business spending, productivity and shifting consumer spending toward services. Plus ten reasons to stay long the United States, and seasonality suggests the S&P 500 benchmark just entered its strongest month of the year—July. |
The Horse is Out of the Barn
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The real question for investors is how much their money will be worth after this “transitory" inflation is over. Also, a look at which categories are likely to appreciate next, and how stocks may be supported by corporate earnings. |
Elevated Narrow Range for Margins Likely Through 2022
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Because of deeply negative current real interest rates, profit margins are unlikely to decline much from elevated current levels before 2023, in our view. Also: a mid-year glimpse at global equities, and research and development as a key driver of global growth and competitiveness. |
Nuclear Energy: The Ultimate Green Energy Play
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To reach net-zero carbon emission goals by 2050, nuclear energy is likely to play a prominent role. Still Frosty: U.S.-China Relations and the Implications for U.S. Investors. The Federal Reserve's wind-down of the Secondary Market Corporate Credit facility is not an issue for markets, in our opinion. |
Keep on Keeping On Until Pent-up Demand Is Gone
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Coincident and leading indicators of U.S. business investment spending remain positive heading into the back half of the year, pent-up demand will quickly evaporate at this pace of growth. The global baby bust and market implications. European yields are turning positive. |
Inflation Fears Create Ambiguous Market Signals
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Inflation fears create ambiguous market signals. Key global developments to watch and potential catalysts that might drive markets going forward. What Federal Reserve tapering could mean for equity markets. |
Arming Portfolios for the Inflation Rotation
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Ultra-aggressive Federal Reserve efforts to re-anchor inflation expectations at a higher level have started to show results. Arming portfolios for the inflation rotation. “Cashing in" on the global consumer recovery. |
What's Next for the Manufacturing Cycle?
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The manufacturing index suggests cyclical momentum is as strong as we have seen in the post-war period. A Two-Tiered Trend in Emerging Markets. Reality Check: Some Inconvenient Truths about the Green Revolution. |
Inflation in the Material World
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Structural deflation in the Technology sector has lulled many investors into complacency about the outlook for inflation. Concerns over the next leg for equity markets have become more acute. Pandemic startup surge: The spike in applications to start new businesses. |
Fed Not Ready To Spoil the Party
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The Federal Reserve is not ready to spoil the party. A robust U.S. economy is not only considered a seismic tailwind for U.S. corporate earnings but also represents a powerful blast to global earnings. The share of zombies may be in remission amidst a favorable macro backdrop. |
Housing on Fire
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We expect the strong housing expansion to continue. Don't forget about the three bears. The American Jobs Plan lays out a sweeping set of priorities with the aim of creating jobs by addressing infrastructure underinvestment, concerns from climate change, and demographic and development challenges. |
Inflation Complacency
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Inflation complacency: Early warning signs are pointing to big upside inflation surprises ahead. The U.S. is leading the global economic recovery and entering into a growth revival. The year-over-year changes in the Consumer Price Index (CPI) over the coming months are likely to be elevated. |
Reflation Tailwinds Also Give Boost To Oil Prices
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A high correlation with inflation favors energy stocks as potential defense against the declining value of money. The geopolitics of U.S.-China relations remain key to market expectations and returns. American Exceptionalism, with a Caveat. |
The Market Balance Sheet
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In our view a clear-eyed understanding of the bull and the bear cases may aid key portfolio decisions. After the Suez Saga: Implications for a Globalized Economic System. What Divergent Transatlantic Growth Means for U.S. Investors. |
Important Disclosures
Opinions and data are as of the date of this report and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S" or “Merrill"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors.
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
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