One of the biggest stocks in the country is sitting relatively unloved and appears ready for an investment. That stock? Bank of America, only the biggest deposit holder in the US. The single most important thing to recognize about the bank is that is a well-run powerhouse commanded by the architect who rebuilt it after the Crisis—Brian Moynihan. The bank has a 2.46% dividend, which is looking sweeter every day. JP Morgan just went bullish on the stock, and if Moynihan sticks with the trend and boosts the dividend and adds buybacks, the future looks very bright.
FINSUM: There are some headwinds given the likelihood of falling rates, but that situation also tends to juice all stock prices, which provides some good downside cover.
Stop worrying so much about the US economy. That is what Bank of America is saying. The bank’s CEO went on the record yesterday explaining the simple reason that the US will avoid a recession. That reason? US consumer health. Moynihan cited internal statistics from BAML that showed that consumer spending has risen almost 6% in Bank of America accounts in the last 12 months versus the previous 12 months, showing that consumers are healthy. Consumer spending makes up 68% of the US economy. Moynihan was dismissive of the yield curve inversion, saying it is likely just a product of an influx of money because of negative yields elsewhere.
FINSUM: Bank of America is the largest US deposit holder, so it has an unparalleled insight into consumer spending. We think this is quite a positive sign.
Right now is high time for investors to be worried about bonds. Bond funds have received a lot of fast money in recent months because of the well-telegraphed rate cut. According to BAML, the net inflows into fixed income funds have reached a “staggering record” of $455 bn in 2019. That compares to just $1.7 tn in the last decade. Yields have tumbled this year, with ten-year yields down from 3.2% in November to just 2.06% now.
FINSUM: The outlook for bonds got murkier yesterday with the Fed’s relative lack of dovishness. It is not entirely clear that rates are going to keep falling, so it is not hard to imagine bonds facing some losses now given how much speculation there was of a large Fed rate-cutting program.
Don’t let the cooling of the trade war between the US and China fool you, the markets are not in a good position, at least that is the position of Bank of America. The bank thinks there won’t be a deal between Washington and Beijing until the US market feels real pain. They think the looming Q3 correction will be the stimulus that gets a deal done because Trump operates under a “no pain, no deal” paradigm. “The markets are likely to view the summit as a modest positive in the short run. But stepping back, we see several reasons for concern”, says Bank of America.
FINSUM: The “no pain, no deal” concept makes a lot of sense to us. The bigger question, though, is what would cause the pain because markets certainly aren’t hurting from the threat of a trade war. Maybe a big earnings miss? (See below)
One of the biggest banks in the country has just offered a very bullish view. BAML says the US will avoid a recession. The comments come from the bank’s CEO, Brian Moynihan, who believes that growth will slow, but then flatten out and not go into a recession. “Everything we see in our customer base is consistent with a slowdown to 2% and a flattening out from there”, he says.
FINSUM: We found these comments to be genuinely interesting because BAML has a view on the economy that few do. Not only are they the largest consumer bank, but also the biggest mortgage lender. That means they can watch the pace of deposit growth and borrowing in a very direct way, and thus can take the economy’s pulse.