Merrill Lynch keep their negative attitude towards the markets, expecting "The Big Low"

07.12.2018 / 01:59

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The stock market slump will not stop and change its direction in 2019, while expectations for the Fed to continue to raise interest rates do not stop, and corporate profits begin to grow. This is claimed by Bank of America Merrill Lynch Global Research.

The bank does not see the bearish conditions started in Q1 of 2018 soon to change to positive. According to them, the market will turn when we reach the so-called. "The Big Low" and therefore remain with the sword attitude.

Markets remain highly volatile throughout the year. The S & P500 began a correction in October, down more than 10 percent from its highest peak on September 21. In Asia, Shanghai Composite is in the sword territory after falling within 26% of its 52-week peak. The main factors contributing to massive sales are constantly mentioned in the media, Fed policy, declining corporate profits and slowing down global economic growth.

The Fed raised interest rates three times in 2018, and it is expected this month to raise them again. The Central Bank expects to raise interest rates twice more in 2019. But Michael Hartnett of BofAML thinks they will raise them four more times.

He recommends purchases of iPath S & P500 VIX Short-Term Futures ETN (VXX), which are rising alongside the Cboe Volatility Index (VIX) futures as a way to leverage gains from volatility. The instrument reports an increase of 31.7% this year, well above the S & P500.

Hartnett also advises to look for purchases in Brazilian, Russian, Indian and Chinese stocks, and to short-sell the shares of FAANG. In his shopping recommendations, he also adds the SPDR S & P Homebuilders ETF.

Source: CNBC

Photo: Pixabay

Trader Martin Nikolov

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Merrill Lynch keep their negative attitude towards the markets, expecting "The Big Low"

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