MERRILL LYNCH’S BULLISH 2010 OUTLOOK – A BUBBLE IN PESSIMISM
by ilene - December 15th, 2009 1:09 pm
This "pessimism bubble" idea seems a bit Orwellian, but part of its beauty is that it’s invisible from the inside. – Ilene
MERRILL LYNCH’S BULLISH 2010 OUTLOOK – A BUBBLE IN PESSIMISM
Courtesy of The Pragmatic Capitalist
We are just about finished wrapping up our series on 2010 outlooks. In this article we’ll outline Bank of America Merrill Lynch. Bank of America Merrill Lynch is very bullish heading into 2010 (an outlook similar to RBC). They see many of the trends of 2009 continuing into 2010 and driving equity markets around the world higher by double digits (see JP Morgan’s bullish emerging market outlook here). Ethan Harris, head of North American economics summarized the Merrill outlook:
“We believe the global economy will gather momentum in 2010. We think that the unprecedented mix of near-zero interest rates and high budget deficits will engineer an economic recovery that is real and sustainable. We aren’t forecasting a swift return to robust growth. In fact, the recovery will likely lag behind those of previous recessions – but we believe that the world economy will perform far better than the economic consensus would indicate.”
This macro outlook is underpinned by a number of variables:
- Global growth will be 4.4%, Chinese growth will be 10.1% and U.S. growth will be 3.2% – all above 2010 consensus estimates.
- Inflation will remain benign.
- U.S. stocks will rise 15% led by strong growth in global cyclical sectors – tech, energy, industrials and materials. Financials are also expected to perform well as the yield curve remains conducive to strong earnings.
- The MSCI All-Country World Index will rise 20 percent.
- Gold and oil will both continue to rally as strong demand from foreign investors remains the primary driver. Gold will breach $1,500 and oil will surpass $100.
- Government bonds will perform poorly.
- The Dollar & Yen will rally against the Euro.
Merrill also notes 10 key investment themes for 2010. From PR Newswire:
10 Investment Themes for 2010
- Government Balance Sheet Risk: The soaring U.S. budget deficit and a Chinese currency revaluation will drive 10-year U.S. Treasury yields above 4 percent by year-end 2010. Shorter-duration Treasuries and U.S. investment-grade corporate credit are less susceptible to such risks.
- Rising Taxation: The