Follow U.S. Immigration and follow U.S. Economic trends: Michael Hartnett, Chief Investment Strategist at Bank of America Merrill Lynch, stated that 2014 will be a year of rapid development.
In a report to clients, Hartnett stated: “We believe unconventional policies mean unconventional results, such as macroeconomic and market prosperity in 2014. In our view, the macroeconomy will be boosted by a lighter fiscal burden and fewer banking headwinds. At the same time, we also believe the U.S. financial market
prosperity will likely continue until recovery in areas outside of finance becomes evident and policies begin to tighten.”
The following are the main points of his report:
“We believe the medicine that can soothe investors' nervous moods remains central bank liquidity. Since 2007, stimulus policies have remained unprecedented in scale: central banks have purchased $13 trillion in foreign exchange reserves and financial assets, and central banks have cut interest rates 560 times. The bull market still appears to be driven by liquidity: our fund manager survey results show that among 235 investors surveyed, only 13% believe the global economy will grow above trend in 2014, while 84% believe it will be below trend. In our view, the ‘Bernanke-style care’ may have truly eased the concerns of all well-known investors.”
We believe that the U.S. economy will grow more strongly over the next 12 months, surprising investors. There are three reasons for this:
First, successful asset price inflation and other stimulus measures——the U.S. economy has been effectively stimulated by monetary policy, a booming real estate market, a depreciating U.S. dollar, record-high corporate cash balances, and increasing energy independence. If the U.S. economy does not accelerate growth in the coming quarters, it is difficult for us to predict when it will grow.
Second, a lighter fiscal burden——our team of economists estimates that the fiscal drag on U.S. economic growth will reach 1.5 percentage points this year, and as the GDP growth rate increases from 1.5% in 2013 to 2.7% in 2014, the fiscal drag on economic growth will decrease to 0.5 percentage points next year.
Third, fewer banking headwinds——U.S. banks appear to have accelerated lending to large enterprises, which is now growing at a double-digit rate, while loan growth to small and micro-enterprises has also achieved its first positive figure since May 2008.
At the end of the article, Hartnett concluded: “We continue to believe that asset allocators should only reduce risk exposure when all parties agree that the economy is growing sustainably, allowing the Federal Reserve to reduce liquid assets and raise interest rates.”