Bank of America Corp. (NYSE: BAC) has a new macroeconomic report in its RIC Report series. As it is December now, it is the investment ideas for 2013. BofA has 10 themes it is watching for its Macro/Investment Strategies as the market remained preoccupied with tail risks throughout 2012. Investors have shifted their focus from a break-up of the eurozone to a hard landing in China and finally to the U.S. fiscal cliff.
In 2013, BofA's RIC Report shows that a core view that the global economy will gradually pick up steam in the second half of the year, following a resolution to the fiscal cliff and after Spain asks for formal help from the European Central Bank.
As far as changes to equity allocations: Reduce large-cap growth and raise large-cap value, small-cap growth and small-cap value. Changes to bond allocations: Reduce mortgage-backed securities and raise corporate bonds.
BofA's 10 key investment ideas for 2013 are as follows:
- Companies over countries.
- Buy neglected U.S. multinationals: "We maintain our core US equity position, and are constructive on European, Japanese, and emerging market equities."
- Buy small-cap tech stocks.
- Add exposure to European equities: "We believe the big tail risk of a Eurozone break-up is behind us."
- In emerging markets, stay long consumer and scarce yield: "The recovery of EM activity will likely be led primarily by the BRIC economies, and particularly by China."
- Buy higher-beta credit sectors, especially financials.
- Focus on high-yielding sectors in municipal bonds.
- Long precious metals: maintain exposure to gold as gold will rise to $2,000 per ounce.
- Buy assets tied to U.S. housing recovery BofA sees U.S. home prices rising by 3% in 2013 after the 5% gain in 2012.
- Continue to hedge risk, particularly in the first quarter of 2013.
Bank of America sees the S&P 500 Index rising to 1,600 for a new all-time high. Its RIC Report said:
While we believe near-term risks to US equities remain skewed to the downside as the Fiscal Cliff plays out, the asset class should pick up in the second half of 2013 as US and global growth gain momentum.
JON C. OGG
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