Bull Market Heading for Major Correction in 2018, Bank of America Says

The bull market is showing signs of cracking

Bank of America Corp. (BACGet Report) says signs are growing that the eight-year-old bull market in stocks and risky assets could soon come to an end. And, as with all late-stage bull markets, the trick for investors is in getting the timing right. The Standard & Poor’s 500 Index, a key benchmark for U.S. stocks, could peak at 2,863 during the first half of 2018, Bank of America analysts predicted in a report. That’s 8% above current levels.

But the second half could bring mostly gloom for investors, as the Federal Reserve tightens financial conditions by raising interest rates and shrinking its balance sheet. Volatility — a measure of the size of daily price swings — could rise from this year’s unusually low levels. Inflation is likely to increase. Yields on corporate bonds could widen relative to those of U.S. Treasuries — an indicator of fading investor confidence in companies’ ability to repay their debt. “Signs of bubble-like behavior abound,” according to the report, which cited examples like record-high art prices, soaring Bitcoin prices and a 100-year-bond sale by Argentina, the South American nation that has defaulted on its debt eight times in the past 200 years. Next year “could represent the move toward euphoria, which typically heralds the end of a bull market.”

http://www.the street.com…  March 05, 2018

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