In 2023, European and American countries will be plagued by high inflation, and the undercurrent of financial markets will surge, what "accidents" will happen in 2024?
Bank of America on Tuesday released its annual list of "2024 Potential Market Surprises," which made a top 10** list for 2024. In the report, Bank of America warned that the fastest financial easing in history could throw markets out of balance if the expected ideal economic scenario does not materialize. Bank of America advises investors to pay attention to the difference between the relative stance of the bond market and the Fed's.
Bank of America also mentioned in the report that Japanese stocks will lead the rally in developed markets, technology giants will be affected by "geopolitical risks", and the IPO market will recover.
Here are the top 10 for Bank of America**:
The process of achieving low inflation is fraught with uncertainty and fragility:In 2024, various global events may upend the market consensus on a smooth reduction in inflation, which may lead to higher inflation. Bank of America has warned that the turmoil in the Red Sea poses a threat to a "soft landing" of inflation that the market is pricing in.
Despite the benchmark interest rate of 5%, business operations remain stable:Bank of America argues that the relatively robust corporate debt structure, large cash reserves, and access to private credit despite the high default rates faced by companies indicate a low likelihood of a widespread wave of bankruptcies.
Japanese stocks led the gains in developed markets:Bank of America strategist Masashi Akutsu** led developed markets by 13% in 2024, driven by corporate reforms and more attractive valuations relative to U.S. equities.
"Geopolitical risks" put pressure on tech giants:Major tech companies such as Apple and Nvidia have risen from geopolitical risks, with Bank of America advising investors to move to a more balanced index.
High bond taxes have shifted investors' focus from buying TreasuriesBank of America notes that investors have different tax treatment on interest income from holding Treasuries and income from holding them for a long time**. The tax rate on interest income earned from holding Treasury bonds is 37%, while the tax rate on income earned when holding ** for a long time is 20%. Bank of America believes that investors may initially be attracted by the 5% yield on US Treasuries, but they may shift their focus due to favorable tax treatment**.
Demand for U.S. Treasury premiums:Bank of America believes that investors have lost confidence in the sustainability of the U.S.** budget, which in turn may lead them to seek higher returns on Treasuries to compensate for the potential risk.
The IPO market is recovering:According to the SPDR S&P Bank ETF KBE and the exchange, the IPO market is likely to recover in 2024 after a downturn in 2023 due to favorable macroeconomic conditions and interest rate cuts.
Energy investment is more rational:Due to the underperformance of renewables**, investors may re-appreciate the value of the undervalued oil, gas and nuclear energy sectors and turn to investing in traditional energy sources**.
The biotechnology and pharmaceutical industries are poised for growth:In 2023, the entire pharmaceutical sector is dominated by first-class drug manufacturers, and in 2024, advances in Alzheimer's research are likely to take the pharmaceutical industry to new heights.
Regaining a passion for the free market:With regulatory burdens still heavy, the upcoming U.S.** is likely to inspire expectations for a more business-friendly environment, boosting investor confidence.
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