FX168 Financial News (Europe) News On Tuesday (September 10), Bank of America said that market volatility is increasing, and the stock market will remain volatile in the next few years. #2024年下半年市场展望 #
The company said that in the short term, election-related policy uncertainty will cause the market to continue to fluctuate. Looking ahead to the end of 2027, the yield curve indicates a further increase in volatility in the future, as shown in the following chart:
The yield curve indicates that the VIX Index will continue to rise in the next few years
(Source: CBOE, BEA, BofA US Equities, and Quantitative Strategy)
Furthermore, Bank of America's proprietary “institutional indicators” have entered a sluggish zone.
With these factors in mind, the company recommends defensive stocks, which generally perform well in uncertain or weak times.
The analyst wrote on Monday (9/9): “Quality, stability, and revenue protected investors in a previously volatile market. We've re-adjusted our industry ratings to enhance these characteristics.”
On the other hand, the bank warned that investors should avoid increasing investments in the popular tech sector.
The bank said that even though price fluctuations help lower the prices of large market capitalization stocks, several characteristics still make such stocks unworthy of investment.
“Don't buy tech stocks,” analysts said. “Despite rumors that IT stocks have been hit hard, we still have an underrated attitude towards IT stocks.”
The bank notes that the ratio of enterprise value to sales in the industry has reached a record high, which indicates that these companies are still overvalued. Meanwhile, as the S&P 500 prepares to establish new index cap rules, technology funds may soon face passive selling pressure.
Specifically, the index plans to reduce the weight of equity funds with assets of $350 billion, Bloomberg reports. In this case, the passive investment instrument will have to restructure its holdings during the upcoming quarterly rebalancing.
As long-term volatility increases, quality and revenue should play a greater role in portfolios, analysts wrote.
Although growth stocks were reasonable when borrowing costs were low in the 2010s, this is changing — banks expect single-digit returns over the next few years.
Savita Subramanian (Savita Subramanian), head of US equities and quantitative strategy at Bank of America, said that exposure to quality assets also makes sense in the short term.
“Don't be a hero,” she told CNBC on Friday. “Just park your car in a safe all-return vehicle and wait a while to get paid.”
In a report last week, Subramanian pointed out that today's quality stocks aren't expensive, and stocks rated B+ or higher are trading slightly higher than lower quality stocks.
Meanwhile, utility and real estate dividends should attract investors' attention as the Federal Reserve cuts push investors to look for revenue opportunities.
The analyst wrote, “Given that the real estate industry's share of high-quality (“B+ or better”) market capitalization has doubled to an astonishing 70% since 2008, the real estate dividend is likely to be more sustainable than the previous cycle.”