"Panic Is Building" BofA Admits; Asks "How Bad Could This Get?"
Just one month ago, Bank of America's equity strategist Savita Subramanian told Barrons to stay the course and to expect a 2,200 year end target on the S&P based on a year end 125 EPS forecast and an implied 17.6x forward multiple. Incidentally her 2015 year end S&P500 forecast was an identical 2,200.
It appears that much has changed with the market's "fundamentals" in the month that followed, because in a note released earlier today, the same Savita, when commenting on the "Worst start ever" to a new year by equity markets, is far less concerned with market upside as she is with analyzing the worst case scenarios.
Here is her take on "How bad could this get?"
The risk of a full-blown bear market remains low without a recession, which our economists continue to see as unlikely. The S&P identifies 13 bear markets since 1928, of which 10 have coincided with US recessions. The exceptions were 1961, 1966 and 1987, which (precisely because they did not occur alongside recessions) were relatively short-lived, followed by swift recoveries. In fact, the average 12-month returns from these peaks was -12%, suggesting we would only be a few percentage lower by spring. We advise against panic-selling, and still believe that we have yet to see the highs for this cycle. Our signal checklist (page 2) provides a framework for how the S&P 500 looks today relative to prior market peaks.
While Savita forgets to mention that in none of the prior historical occasions was the Fed "half-pregnant" with a $4.5 trillion balance sheet at a time of tightening conditions, she does correctly note that the current environment is hardly a "supportive backdrop for profits." Specifically she notes that the weak stock market performance comes in the context of:
- slowing US and global economic growth (US 4Q GDP tracking 1%)
- collapsing commodity prices (oil prices averaged -42% y/y in 4Q)
- renewed fears about China (Shanghai Composite -38% since last June)
- heightened geopolitical tensions (Middle East, North Korea, etc.)
- the first transition to Fed policy tightening in a decade.
Her conclusion is that "these factors have created a difficult backdrop for corporate profitability, and we forecast 4Q EPS growth of -1% y/y (consensus: -4%)."
Actually, according to Factset, Q4 EPS consensus has now tumbled to -5.3% and dropping by about 1% every 2 or so weeks. More on that in a later post.
So is BofA's conclusion to ignore JPM's "sell any rally" call and BTFD? Not anymore, although while BofA does admit that "panic is building" (suggesting this "sets the stage for a rally"), it also says there is one key ingredient missing: growth.
Near-term caution is warranted, but don’t panic sell
In our framework, there are three key drivers of stock returns: valuation, sentiment and growth. But in the near term, sentiment and growth matter most. Panic is building, most likely setting the stage for a rally, but the missing ingredient here is growth. With analysts cutting estimates at an accelerating rate, increasing China risks and no apparent floor for oil prices, we remain cautious on our near term outlook for stocks.
But not cautious enough to change the year end target of 2,200?
(6 votes)
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Last generation of capital accumulation was nuked by ZIRP and near-ZIRP Fed policies. You want growth, you have to accumulate capital for investment first. Way to late to be whining about it now.
It's always nice for JPM, Douchebank, BoA to chime in on a problem they helped create...
The money god is failing. No Atheists in the trenches >> http://wp.me/p4OZ4v-2WG
The best way to discover the origin of rumors is to start them yourself.
--Arnold
On the way in it starts with such civility and aplomb. "How very nice to see you. Welcome to the club. So glad you are here." On the way out, though it's a mass of broken bones, trampled corpses and spilled blood as everyone tries to squeeze through the one small exit door.
They don't usually mention that second part in the prospectus.
When do they drag the trembling, stuttering Billionaire Hank Paulson out of his $100 million mansion to beg for a bailout with tearful eyes.
The same day you get to walk down to the used car dealership and buy a 2017 Masaratti for 10k. Still have a few major rivits to break before the ediface comes down. Guys like Williams can still jawbone intraday recoveries, when the full creditability of verbal stimulus is zero, then we will have monetary implosion.
He has to leave the island he purchased with his Tax Free gains of a lifetime....
fed bumped rate, china says won't stimulate
"......then by deflation" time has come?
They just want you to hand over your money; the prospectus is just CYA.
Same as allways
Welcome back my friends, to the show that never ends..... https://www.youtube.com/watch?v=UeQsZOQqO6I
So that's Jurgster hate speech huh?
The threat is real. New Megadeth - a look into our near future. Dave Mustain is a born again and is teh real deal.
"The clock runs out, the weakest link
A deadly strike, the threat is real!"
https://www.youtube.com/watch?v=3-d6LFLpBvw
Peace sells but who's buying?
"You want growth, you have to accumulate capital for investment first"
That is, precisely, the issue.
Capital is being counterfeited by the Federal Reserve and banks through Fractional Reserve Banking.
The Federal Reserve System has to abolished, then you'll have real capital accumulation by savers.
Then real jobs. No jobs no purchasing no growth.
So real 'capital' is being incrementally destroyed then, right? This is the feeling I get...and holders of real capital know this and are not playing in the casino.
What those in the business world should understand. Paper pushing bankers definitely don't. Growth doesn't happen at 0%. There is no need for businesses to save because right now they have zero incentive/return. Why pay a 6% bank loan when they pay you nothing?
Instead of investing back into the company (to generate future growth) it turns into stock buybacks. Smaller companies may just use extra capital to buy inventory or pay debt (neither necessarily creates growth) instead of saving for a future project.
While we are looking closely at market fundementals right now...........
What we saw made us shit & piss ourselves, vomit uncontrollably, go into convulsions and die.
Blasphemy, according to the Keynesian church of economics!!
Is this the week it starts?
The Northeast US is in our three week winter, increasing heating oil demand.
So, no not this week.
OH NO! It's cold in January. And they were playing golf in short sleeves up there on Xmas eve! Who could have possibly seen this coming!
And the Fed done shocked da monkey while i was away in Japan!
Janet attached one Pt electrode to one nut and a second Pt electrode to the other nut
and threw da switch! Da monkey got shocked!
https://www.youtube.com/watch?v=CnVf1ZoCJSo
Shock da monkey tonight!
<----------SOTU Red
<----------SOTU Green
No brainer?
PRETTY FUCKING BAD, YOU ASSHOLES! Thanks for doing your part in ruining everything! I hope all you bastards hang by your shorthairs!
Jump you mofo's JUMP!
Yeah Oregon, we remember Countrywide Financial.
Thanks for doing your part in ruining everything!
Were you protesting the policies when the times were good?
You have a part in this drama to play, as well as some responsibility to admit to and accept.
REMEMBER. Their excuse will be that you allowed it. And actually nothing can be farther than that truth. You did allow it, you participated, were complicit, were compliant, and enjoyed the party in the roaring Nineties and early 2000s.
You, along with most everyone posting, gave this system of fraud and corruption legitaimacy.
Root fer the wars, any?
Now it's time to payz the piper for yer party.
Now those wars? They are really expensive.
Hope that it was worth it.
when the big houses tell you to sell, you buy with both hands.
I shot my wad using that exact same tactic buying up all the "barbaric relics" i could!
Think I may just blow mine soon too
Fuck you Brian Moynihan. Go tell Ken Lewis.
BAC stock only down 11% YTD.
perhaps they shoudl claen up their own business and sector before pumping and dumping others.
Don't worry bro. They will still pin 17 for you on Friday :)
https://www.washingtonpost.com/news/fact-checker/wp/2016/01/11/bernie-sanderss-claim-that-glass-steagall-banned-commercial-bank-loans-to-shadow-banks/
Great link. Glass-Steagall is the Canary in the coal mine.
Anything that does not reinstate is is just criminal games.
Hillary >>>sold out, ethical black hole
Bush>>> Bush, enough said
Trump>>> Who the fuck knows except he will do what gets him more eyes and builds his ego.
Bernie>>>> Don't like his socialist but love his anti WS and his truth talking re WS
Rest are dickless wonders
Let's assume for a moment that all our worst nightmares are about to come true.
I have prepared for this as far as my means and knowledge would allow. It may be sufficient to provide for me and mine. Or it may not. There's no way to know until that day comes. If everyhting I've done proves to be insufficient, I can at least know that I made a go of it and didn't flail around madly like some brain dead sheep. Cold comfort, but maybe it'll be enough.
I had to do it with being the only one with the situational awareness . Makes if very hard to prepare. They are starting see I was right . To late , my best efforts will have to do.
Feel ur pain...somehow, I think that "I told you so" is just not going to be of much comfort as I choose those around me who are worth carrying.
Worst nightmare? How about dream come true, if it means and end to the Fed and the rotten system that created it. Of course that would be TGTBT. Instead "they" will fix things even better than before....right. After that it's time to fix bayonets.
Thank God family and some friends started to "get it" about 12 months ago. It had as much to do with the social changes as the financial shifts (which can be less visible and harder to understand).
Start coalescing with the like minded. And screw the fucking election, it is a distraction. One more circus to watch that will mean little in the end.
https://www.imf.org/external/pubs/ft/sdn/2012/sdn1203.pdf
What she is trying to say is, "Public don't panic sell until we have unloaded our overweight position in our stocks. "
hahaha, indeed! That's all I read also.
Now all we need is another "all is well" from the German banks :)
I just showed the -18% revenue drop from Alcoa and all the guy saw was the little text that said: "not as bad as they tought"....
he couldn't even grasp the -18% because he relies on the internet to give him guidance.
And there's plenty like that to go arround.
People really want to belief because for years now, they've been dreaming of becomming a billionaire by buying louzy stocks.
China down again..even after the Government bought a bunch...Russia tanking now....USA is up...its a fake rally....we are going to tank this week...there is no growth in the world right now...everyone is trying to save what they have at this point...David Bowie got out at the right time
Decisions, consequences. Only problem is that gov and banks make ALL decisions. Good for them, bad for everyone else.
that's a pretty damn uninterrupted drop they got going on s&p...
full 1/2 yr of pretty straight down w/only one tiny attempt at a uptick (& that was 10 min in/20 min ago)...
[edit:] & as soon as I post that we see another tiny uptick but smaller/briefer than 1st... (grabs popcorn)
These are what I would call "cover your ass" statements which are becoming regular in msm lately.
All of these bozos, that have been cheerleading all the way, want to be able to say I told you so now.
Just shows you what they are made of, very little.