Displaying items by tag: bank of america
While some are saying that we are in “TINA” mode with equities (i.e. there is no alternative), high yield bonds have been seeing a big influx of demand. Because dividends are drying up in the stock market, high yield bonds are becoming increasingly attractive, and Bank of America thinks they are going to do well. They point out that yields in some bonds are much higher than similar yields on equities in the same sector and they expect spreads to tighten in the coming quarter. “While the easy money was last quarter, we still see many tailwinds to nudge high-yield spreads tighter in Q3...Markets should be treated to plenty of positive data surprises now that economies are exiting their lockdown hibernation…an essential ingredient for leveraged credit to perform.”
FINSUM: This seems like a reasonable call, but we think the positive data surprises might be a stretch. That said, yield-hungry investors will likely keep the high-yield space humming along.
According to COVID Loan Tracker, big banks are not doing a good job getting money moving to those who have applied for PPP loans. In their latest update yesterday afternoon, with around 8,000 companies reporting around $3.5 bn of loans from all 50 states, the large majority are getting approved through small and regional banks. In fact, JP Morgan Chase seems to be the only bank getting any applications approved, as Wells Fargo and Bank of America are showing very few approvals on COVID Loan Tracker, with Citi showing none.
COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand when PPP and EIDL advance money starts flowing. The site works by crowdsourcing knowledge on applications and loan disbursements. Our goal is to help the small business community and empower journalists with the data they need to keep the government accountable.
Small and regional banks have been leading the charge in approvals all over the country. This is reportedly because many small and regional banks were already set up to process SBA loans as part of their normal course of business before the COVID-19 outbreak. This means they were already familiar and connected to the E-Tran system being used to process the loans by the SBA.
Yes, you read that right, Bank of America is forecasting a 35%+ GDP fall for the YEAR, not just Q2. The bank thinks the Coronavirus downturn is so bad that the US economy will shrink 7% in Q1, 30% in Q2, and 1% in Q3, a cumulative 35.55% for the year. The downturn would be the worst to ever strike the US.
FINSUM: This is by far the bleakest projection we have seen. Goldman, for instance, sees 19% growth in Q3. So if the economy shrinks 35% this year, what is fair market value for the S&P 500?
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.
Bank of America has just published an important piece of data. The bank has put out the results of its sentiment survey of investors and has found that US investors are the most bearish they have been since the Financial Crisis. The survey was of fund managers, so is an indication of institutional investment sentiment. Allocations to equities among those polled hit their lowest level since March 2009, the month the stock market bottomed. “FMS investors have not been this bearish since the global financial crisis, with pessimism driven by trade war and recession concerns”, said BAML’s chief investment strategist.
FINSUM: It is hard to know how seriously to take this. It is certainly a pertinent piece of information, but is it a bearish indicator or a bullish contrarian indicator?