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Bank Of America Forecasts No Recession Until 2027 (If Ever), Sees S&P At 3,500 In 10 Years

Tyler Durden's picture




 

A year and a half ago, in May of 2014, when Bank of America's chief economist Ethan Harris decided to try his hand at long term (really long-term) forecasts, he made several predictions: that 2015 GDP would be 3.3%, that the long-term potential growth rate of the economy is 2.2%, and that the long-term unemployment rate is 6%.

One year later, we yet again see just why economists tend to be a source of amusement everywhere they go, because moments ago the same Mr. Harris just admitted that 2015 GDP would actually be 2.5% (at best, and realistically 2.1% if Q4 GDP ends up being 1.8% as the Atlanta Fed forecasts), that the long-term growth rate is now lower at 2.0%, even as the long-term unemployment rate has mysteriously declined to 5%, or in other words, a lower potential growth rate results in lower unemployment.

Go figure.

Here is what Harris predicted for the "long-term" in early 2014:

And here is his same forecast as released earlier today:

We leave it up to readers to spot the amusing, if startling, differences.

And yet one thing that hasn't changed in the past 18 months is that like then, so now, Bank of America refuses to forecast a recession any time in the next 12 years! To wit:

Obviously, there is considerable uncertainty in forecasting many years out, so these should be viewed as rough baseline numbers. For example, if history is our guide, at some point in the next decade the US will experience a recession, but predicting a recession far in advance is almost impossible. 

So predicting a recession at some point in the next 12 years impossible, but predicting next year's GDP is "possible"... assuming one has a 25% error rate tolerance.

But if you think that is amusing read the following from another BofA prognosticator, its "Equity & Quant Strategist" Savita Subramanian. This is presented without comment.

S&P 500 targets: 2200 in 2016 and 3500 by 2025

 

We expect modest gains for US large cap stocks in 2016: the likelihood of a recession in the next 12 months is low in our view, but valuations have normalized from previously low levels and narrowing returns are to be expected. Our forecast represents a 5% rise from current levels, roughly equivalent to earnings growth, where we forecast 2016 EPS of $125.

 

10-year S&P 500 forecast: 3500 (+67%)

 

Our work suggests that valuation is a poor short-term timing indicator, but the single most important determinant of long-term returns. Valuations have historically explained 60-90% of subsequent returns over a 10-year time horizon – see Table 2. Normalized P/E – our preferred valuation metric – has explained 80-90% of returns over the subsequent 10-11 years.

 

Based on current valuations, a regression analysis suggests compounded annual returns of 8% over the next 10 years with a 90% confidence interval of 4-12% (Table 2). While this is below the average returns of 10% over the last 50 years, asset allocation is a zero-sum game. Against a backdrop of slow growth and shrinking liquidity, 8% is compelling in our view. With a 2% dividend yield, we think the S&P 500 will reach 3500 over the next 10 years, implying annual price returns of 6% per year.

So... no recession until 2027, if ever, and S&P at 3500 by 2025.

Great, just one thing we would like to know: does Bank of America anticipate another bailout of Bank of America during this upcoming golden age a la 2008, or is that also impossible to predict.

 

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Wed, 11/25/2015 - 18:07 | 6840125 synergize
synergize's picture

Whats a recession?  More importantly, when does Bank of America forecast us to invent unicorns?

Wed, 11/25/2015 - 18:12 | 6840143 Id fight Gandhi
Id fight Gandhi's picture

Pfft only 3500 in 10? I expect it to double every other year.

Wed, 11/25/2015 - 18:46 | 6840258 SILVERGEDDON
SILVERGEDDON's picture

this is the same bunch of mucklucks who thought Countrywide Financial was a good buy.

Saved their asses with a free dose of TARP before they crashed and burned.

Absolute fucking financial geniuses.

Wed, 11/25/2015 - 18:51 | 6840269 hobopants
hobopants's picture

If you want to know what a top looks like, this is it. 

Wed, 11/25/2015 - 19:06 | 6840311 JRobby
JRobby's picture

BofA will have been broken up for 10 years by 2027

BofA will have been cratered for 10 years by 2027 along with the rest of the TBTF

Wed, 11/25/2015 - 18:59 | 6840290 Kirk2NCC1701
Kirk2NCC1701's picture

I'll take "What's Reality in MMT (Modern Monetary Theory)?" for $500, Alex.

For those few cerebral (fact-driven, not dogma-driven) and intellectually honest souls on this site... if there's anything the last 5+ years have shown us, is that Austrian Economics -- for all its intellectual and intuitive appeal (even with me) -- can be suspended for a looong time.

It is during that loooong time of Suspended Austrian Animation, that money can be made Keynesian style (e.g. Stockmarket, Commodities, RE, FX...), and lost Austrian style (PM).  For those of you who are sloppy readers, I will repeat and emphasize:  "For a looong time (5-10years, perhaps more), the economic laws of gravity (Austrian Economics) can be suspended, in favor or a more profitabel model (Wall St Keynesianism and cronyism).

What it boils down to is this:  Are YOU the type to remain true to your economic worldviews/religion and avoid making money (by whatever prevailing season of speical Rules and Forces), or will you seize the day?  Will you be the pinhead debating the number of angels on a pinhead, or will you 'Carpe Diem'?

Wed, 11/25/2015 - 18:06 | 6840126 quintago
quintago's picture

no recession and no inflation. ha

Wed, 11/25/2015 - 18:12 | 6840147 Proctologist
Proctologist's picture

False advertising! There will be No Recession for B of A!

The rest of us? Well, that's another story....

Wed, 11/25/2015 - 18:06 | 6840127 10mm
10mm's picture

It's getting beyond ridiculous with this farse. Predicting yr 2027, righttt.

Wed, 11/25/2015 - 18:37 | 6840173 Normalcy Bias
Normalcy Bias's picture

Aren't we all supposed to be dead by then due to Climate Change?

So what difference does it make?! (Apparently BOA cannot even see the recession we're currently in... or is it a depression?)

Wed, 11/25/2015 - 18:07 | 6840129 trader1
trader1's picture

who will (still be around to) remember this worthless forecast in 2027?

Wed, 11/25/2015 - 20:04 | 6840481 Omen IV
Omen IV's picture

so with TTP closer to approval the Negative Exports  (Imports)went up between the two forecasts substantially

 

Obama solution or deeper hole?

Wed, 11/25/2015 - 18:10 | 6840134 OregonGrown
OregonGrown's picture

The only bank STUPID enough to give me a credit card with more than $1000 limit....

BofA.  

What a bunch of MORONS!

Wed, 11/25/2015 - 18:10 | 6840136 yogibear
yogibear's picture

Yeah! No more bear markets thanks to the central banksters.

Zimbabwe economics where you print until the currency is worthless and everyone is forced into stocks.

Wed, 11/25/2015 - 18:11 | 6840140 Truth Eater
Truth Eater's picture

B-b-b-bailout?  That question is not on our chart.  We do have a few ideas for the federal reserve though.  We want to share with our creditors- you the account holders in our banks.  Should there ever be an unforeseen economic temporary pause, we would like to endorse our creditors to assist us in resolving any issues. But a b-b-b-bailout....  shudder....  we don't even have that idea in the remotest parts of our minds.

Wed, 11/25/2015 - 18:12 | 6840145 yogibear
yogibear's picture

Didn't BOA give illegals credit cards without a credit history?

Fog a mirror, here is a credit $5,000 limit.

Refugee from middle east here's a $10,000 limit.

Wed, 11/25/2015 - 18:13 | 6840151 Selly2k
Selly2k's picture

Are these fucking guys for real? If it wasn't  for the US taxpayer they would be panhandling. What fucking nerve  these guys have.

Wed, 11/25/2015 - 18:16 | 6840162 Bunga Bunga
Bunga Bunga's picture

Green light to hike the rates!

Wed, 11/25/2015 - 18:17 | 6840164 commishbob
commishbob's picture

Whatever they're having, gimme a double. 

Wed, 11/25/2015 - 18:25 | 6840177 kill switch
kill switch's picture
Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval Oct. 21, 2011 2:49 PM ET    |  About: Bank of America Corporation (BAC), Includes: AIG, JPM  

Bloomberg reports that Bank of America (NYSE:BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

 

 

Would you listen to these men?? BOA has no credibility to forecast anything.

 

 

Wed, 11/25/2015 - 18:32 | 6840204 WTFUD
WTFUD's picture

Maybe they're angling for another Buffett Loan.

Wed, 11/25/2015 - 18:38 | 6840224 Phillpots
Phillpots's picture

Thank God for this. Hope everyone listens, otherwise we'll all be in deep shit very soon. Thank you BoA.

Wed, 11/25/2015 - 18:48 | 6840263 Seasmoke
Seasmoke's picture

Brian Moynihan is a criminal.

Wed, 11/25/2015 - 18:53 | 6840275 RaceToTheBottom
RaceToTheBottom's picture

So IBM Global Services just delivered on the HFT Stockmarket program manipulation program.  It will pull QE until the correct numbers are achieved.....

Wed, 11/25/2015 - 18:57 | 6840284 Moustache Rides
Moustache Rides's picture

Ahh, good 'ole Bank of America... always good for a laugh

Wed, 11/25/2015 - 19:07 | 6840312 pliny the longer
pliny the longer's picture

those crazy wacky zany bank' owned by' america (taxpayers, those 10% of you);  oh geez, huh uh  huh  huh  uh 

well u get the idea

(can't hate much harder here . . .  )

 

Wed, 11/25/2015 - 19:09 | 6840320 Iocosus
Iocosus's picture

Is Gartman consulting for BofA?

Wed, 11/25/2015 - 19:13 | 6840328 CHoward
CHoward's picture

LOL  this is just too funny.

 

HAPPY THANKSGIVING EVERYONE!!

Wed, 11/25/2015 - 19:21 | 6840353 Soul Glow
Soul Glow's picture

QE4EVA

Wed, 11/25/2015 - 19:43 | 6840415 YHC-FTSE
YHC-FTSE's picture

Not quite in the new keyboard category but one of the best laughs of the week and it got funnier as I read. What manner of chicken gizzards and rune stones were used by the soothsayer called Savita Subramanian to make these numbers? Other POMO banks would like to know.

Wed, 11/25/2015 - 19:53 | 6840448 pebblewriter
pebblewriter's picture

3-mo bills at 3.85 on 2.3% CPI?

Wed, 11/25/2015 - 19:55 | 6840453 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Seriously. This chart makes no sense at all even by mainstream economics standards.

If output equals consumption plus investment (Y=C+I), how can investment in housing or anything else grow faster than GDP forever? 

 

Wed, 11/25/2015 - 22:33 | 6840953 Mentaliusanything
Mentaliusanything's picture

Source states in the fine print. "statistical probability of accuracy is 75 trillion to None.

Not meant for investment advice so seek professional help for Bernanke depression"

Wed, 11/25/2015 - 20:03 | 6840478 Permanentvacae
Permanentvacae's picture

Lmao. Last bank is listen to is any with the name America in it

Economist have ph d's. Because they phukin dummy"s

Wed, 11/25/2015 - 20:28 | 6840571 EBT excepted
EBT excepted's picture

if dat only 67 pahcent den it make mo' sense to keep investin' in mahsef...drugged n' alcohaul...

drugs peepses...

Wed, 11/25/2015 - 20:53 | 6840634 pliny the longer
pliny the longer's picture

some people got forecasted. . .

 

seriously, are we in bizarro-world, i mean really WTF is it me? 

Wed, 11/25/2015 - 21:02 | 6840646 InnVestuhrr
InnVestuhrr's picture

Does anyone know where the BofA forecasters get their mary-juana from ?

If I am going to try it, then I want the stuff that gives the biggest high, and clearly these guys have the best stuff, almost good enough to fold space-time, like "the spice".

Wed, 11/25/2015 - 21:16 | 6840691 goldenbuddha454
goldenbuddha454's picture

LOL!

Wed, 11/25/2015 - 22:00 | 6840832 silverer
silverer's picture

Prediction = wishful thinking.  I'm beginning to think economists are inclined to always try to look for numbers that give results that look good, because that's what the buyers want to hear.  If you look out there, the doom and gloom predictors are kept off the shows and to a great extent, out of the money.  If they lied and predicted rainbows, their lives would be easier.

Wed, 11/25/2015 - 22:26 | 6840925 rich1657
rich1657's picture

Beg, Borrow, or Steal all the money you can from BAC, then fuckin' stiff 'em. That'll teach 'em a lesson.

Wed, 11/25/2015 - 22:41 | 6840979 Yen Cross
Yen Cross's picture

 BaC goes through analyists lke celophane hookers. [pun intended.sp;]

Wed, 11/25/2015 - 23:28 | 6841131 DontFollowMyAdv...
DontFollowMyAdviceImaDummy's picture

PhDs

Really

Estimate

Dunces

Invest

Coin

Totally

In

Our

Nation

Thu, 11/26/2015 - 22:22 | 6844245 Machete Republic
Machete Republic's picture

Oh man, this is great news. I've been looking at the data getting worried but now I'm ok. We are ok. In that case, I'm going long icecream and shorting heaters, both for the summer contract.

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