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Analysts at Bank of America-Merrill Lynch have created the Global Wave,
a compilation of seven global indicators designed to provide a comprehensive assessment of trends in global economic activity. The compiled data allows investors to predict equity market performance and…[it indicates that there is an 86% liklihood that we will experience a 14.2% increase, on average, in the performance of global stock markets in the next 12 months. Read more about the “Global Wave” below.] Words: 462
So says Frank Holmes (www.usfunds.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Holmes goes on to say, in part:
The Global Wave consists of 7 components, as follows:
| Global Component | Measures |
|---|---|
| Source: Bank of America-Merrill Lynch | |
| Industrial Confidence | Global economic output |
| Consumer Confidence | Demand/consumption side of the economy |
| Capacity Utilization | Investment/productivity side of the economy |
| Unemployment | Global labor market |
| Producer Prices | Producer prices in the manufacturing sector |
| Credit Spreads | Credit spreads using the Merrill Lynch Global High Yield Index as a proxy (the U.S. High Yield Master II Index was used prior to 1998) |
| Global Earnings Revision Ratio | Number of stocks with earnings upgrades versus the number with downgrades based on BofA-ML’s three-month consensus |
Last week, the Global Wave was signaling a trough in the global cycle, which prompted BofA-ML to suggest “investors position for an economic upturn” by increasing their exposure to equities.
According to BofA-ML’s research, the MSCI ACWI (All Country World Index) averages a 14.2 percent increase for the 12 months following a trough in the Global Wave. Historically, the index has experienced a positive return 86% of the time.
Contributors to Upswing
1. Major and Extensive Quantitative Easing:
BofA-ML says global central bankers’ 138 stimulative policy initiatives in just the past eight months “appear to be having a positive impact” and, [as such,] macroeconomic data is improving.
2. Positive Trends in:
- industrial confidence,
- earnings revision ratio,
- credit spreads,
- consumer confidence and
- capacity utilization (while unemployment and producer prices are contributing negatively).
3. Earnings in U.S. Beating Analyst Estimates:
83% of the 106 companies in the S&P 500 Index that have reported results so far have beaten analyst estimates… If the current pace holds up, it would represent the highest beat-rate in three years….
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Conclusion
Emerging markets and the Asia Pacific ex-Japan region have historically been the best-performing regions following a trough for the Global Wave… The data shows that the following sectors have historically been the best performers:
- technology,
- diversified financials,
- basic materials,
- autos and
- energy.
That’s good news for oil and gold stock investors.
* http://www.usfunds.com/investor-resources/frank-talk/are-you-ready-to-ride-the-global-wave/ (To access the articles please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Another Article Featuring Bank of America Analysis
1. Uncanny Relationship with Nikkei & 1929 Crash Suggests S&P 500 About to Top Out – and Then Tumble!
It has been determined by a number of market analysts (see below) that the S&P 500 could continue its progression to as high as 1500 in the first half of 2011 before it collapses completely based on a unique comparison with the Nikkei 225. Before you reject this possibility out of hand please read the entire article. Words: 596
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