21/11/18

"There Is Now An Alternative": BofA Expects Stocks To Peak In 2018, Drop In 2019



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"There Is Now An Alternative": BofA Expects Stocks To Peak In 2018, Drop In 2019
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In her just released forecast for 2019, BofA equity strategist Savita Subramanian echoed what Goldman said yesterday, when it advised its clients to "lift cash allocations", with Subramanian stating that TINAA - or There Is Now An Alternative - is the new TINA.

Specifically, the BofA strategist writes that for much of this cycle, the "TINA" argument ("There is no alternative") held for stocks: bonds' elevated rate risk and zero-yielding cash allowed stocks to handily win the asset class beauty contest. But cash is now competitive and will likely grow more so (assuming the Fed keeps hiking which is increasingly in doubt).

BofA calculates that cash yields today are higher than the dividend yield for 60% of S&P 500 stocks, and the bank's Fed call which sees the Fed continuing to hike for much of 2019, puts short rates close to 3.5% by the end of 2019, well above the S&P 500's 1.9% dividend yield.

What does this mean for stocks? Here Subramanian writes that she expects equities to peak next year, but ....

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