Australian shares are poised to open lower. BHP and Rio Tinto fall in New York with iron ore, copper. TD sees RBA lifting 0.75ppt. Follow updates here.
Bank of America has turned bearish. In a note, equity and quant strategist Savita Subramanian said she cut her year-end target for the benchmark US equity index to 3600 from 4500.P 500 could trade between 3000 and 3200 before the end of 2022.
Part of the rethink comes after Bank of America’s economics team said it now expects a “mild” US recession starting in the second half of 2022; real GDP growth for 2022 was lowered to 1.1 per cent from 2.3 per cent. The revisions point to US interest rates rising to 3.25 per cent to 3.5 per cent by year end, with the Federal Reserve pivoting in the second half of 2023.
BofA forecasts US rates will be in a range of 2.25 per cent to 2.5 per cent by the end of the first half of 2024. The bank previously expected the Fed to lift rates through 2023. “Our derivatives team sees higher downside risks to equities given the historically wide spread between rates and equity volatility, and believes equities are not adequately discounting a recession if we are already in one. Our advice for equity investors: stick with quality and cash flow yield.”“Wall Street’s consensus equity allocation has been a reliable contrarian indicator over time. Currently at 54.
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