The stock market won't be automatic money next year, but will reward investors who can move money, stomach more volatility -- and bet more heavily on European and Japanese stocks than on American companies, strategists at Bank of America Merrill Lynch BAC say.
But that seeming placidity masks shifts below the surface. Value stocks will outperform growth. Financial shares will replace consumer stocks as market leaders, a move that has been ongoing since Donald Trump won the presidency on Nov. Materials stocks and commodities trump -- pun intended -- technology shares and bonds. And the firm insists that active management -- which is, after all, what Merrill sells -- should beat macro-oriented or index investing. Finally Merrill says stocks in both Europe and Japan will beat U.
Both Europe and Japan benefit more from a pickup in inflation than the U. A sideways pattern can be interpreted in at least two ways.
If this is a bear market, why do the buyers keep showing up? Trump sold most of his personal stock holdings in June This article is commentary by an independent contributor.
At the time of publication, the author held no positions in the stocks mentioned. The call to buy financial stocks like JPMorgan Chase JPM and Goldman Sachs GS could be shaky for a few reasons.
For one, buyers of global commercial and investment banks are counting not only on a climb in interest rates, but also on a paring back of the Dodd-Frank law that Republicans blame for holding down bank lending and profits. A Trump portfolio that LPL Financial planners are pitching emphasizes regional banks, which stand to see wider interest-rate spreads, but aren't counting on major Dodd-Frank changes.
Asset managers like T. They're up more than the market since the election; T. Merrill sees year Treasury rates hitting just 2. Oil is actually down this week , as the market absorbs the news that the Organization of Petroleum Exporting Countries, or OPEC, has agreed to limit oil production. It's not a certainty that the deal will hold -- non-OPEC member Russia hasn't yet agreed to honor it, and U.
All of this argues for selectivity -- and a willingness to look outside the U. Merrill is high on Japan because it believes Prime Minister Shinzo Abe and the Bank of Japan have finally managed to stimulate the nation's economy enough to break out of its long stagnation, said Chief Global Economist Ethan Harris. European stocks should benefit from a combination of economic improvement and a central bank that is actively stimulating Europe's economy even as the Federal Reserve begins to raise U.
Much of the first half of will be devoted to seeing which of Trump's many policy ideas he is serious about -- like much of Wall Street, Merrill expects the new president to cut taxes but stop short of raising tariffs on Chinese or Mexican goods. Small-Caps On a Tear, and the True Meaning of ECB Policy Tweaks","url": Action Alerts PLUS is a registered trademark of TheStreet, Inc.
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