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The analysts highlighted five risk factors that could simultaneously affect credit, equity and commodity returns in July and September: pandemic, price, positioning, politics and corporate profits.
Bank of America said the first half of the year had been good for many assets, but the "Wall Street boom/bubble" could use a "breather", Insider reported the analysts as saying.
Bank of America said that due to a new rise in cases of COVID-19 due to the delta variant of the coronavirus, estimates of expected growth in asset values and returns will fall this year and next, and this could put pressure on prices and cause them to fall, Insider reported.
The new wave of the coronavirus is coming at a time when asset values are unusually high: the price-to-earnings ratio of S&P 500 company securities is on par with the dot-com bubble, the record highs seen in the early 2000s amid a surge in internet companies, Insider wrote. Real estate and commodities are also at or near all-time highs. U.S. spreads between risk-free bonds and junk bonds are particularly narrow, and junk bond yields fell below inflation on Friday, Insider pointed out.
Surveys show that capital fund managers are already putting money into assets that are best suited to high inflation and weak growth, Insider continued, citing a Bank of America survey. At the same time, fund managers allow the S&P 500 to fall below 4,000 points in the third quarter, which is about 8% less than it is now, with technology company securities falling the hardest, Insider noted.
At the same time acceleration of inflation in developed countries will lead to weakening of economic stimulus measures, analysts expect. Corporate profits will also suffer due to possible COVID-19 restrictions, supply constraints and slower growth, Insider said. All of these factors will cause the S&P 500 to fall, Bank of America analysts said.
source: businessinsider.com
Bank of America said the first half of the year had been good for many assets, but the "Wall Street boom/bubble" could use a "breather", Insider reported the analysts as saying.
Bank of America said that due to a new rise in cases of COVID-19 due to the delta variant of the coronavirus, estimates of expected growth in asset values and returns will fall this year and next, and this could put pressure on prices and cause them to fall, Insider reported.
The new wave of the coronavirus is coming at a time when asset values are unusually high: the price-to-earnings ratio of S&P 500 company securities is on par with the dot-com bubble, the record highs seen in the early 2000s amid a surge in internet companies, Insider wrote. Real estate and commodities are also at or near all-time highs. U.S. spreads between risk-free bonds and junk bonds are particularly narrow, and junk bond yields fell below inflation on Friday, Insider pointed out.
Surveys show that capital fund managers are already putting money into assets that are best suited to high inflation and weak growth, Insider continued, citing a Bank of America survey. At the same time, fund managers allow the S&P 500 to fall below 4,000 points in the third quarter, which is about 8% less than it is now, with technology company securities falling the hardest, Insider noted.
At the same time acceleration of inflation in developed countries will lead to weakening of economic stimulus measures, analysts expect. Corporate profits will also suffer due to possible COVID-19 restrictions, supply constraints and slower growth, Insider said. All of these factors will cause the S&P 500 to fall, Bank of America analysts said.
source: businessinsider.com
