Global Research Unlocked

AI: Hardware Today, Software Tomorrow Corporate investments in AI have had significant impact on the financials of certain semiconductor and server companies, but while software providers stand to benefit from AI investments too, the technology hasn't yet shown up in the profits of these companies in a meaningful way. Alkesh Shah draws parallels between AI today and the Internet in

Higher rates broadening the converts issuance market Convertible bonds (CBs) can offer equity-like returns with downside protection thanks to the coupon and the ability to redeem most CBs at par. Thus far in 2024, CB issuance has been active, well ahead of levels seen the last few years. Michael discusses the reasons for such an active issuance year, including that Pandemic debt is

Earnings improvement is still fairly nascent In 2023, we saw an earnings recession, at least in the first half of the year, despite GDP growth that was ahead of trend. Back then, companies were adapting to higher rates, weaker demand and climbing costs, which weighed on earnings. Ohsung Kwon expects earnings growth to look much better in 2024. This year benefits from a lower 2023 e

Data trends are approaching Fed threshold for rate cuts The latest economic data releases this year suggest the labor market remains strong but is cooling and the consumer is resilient in the face of sticky inflation, especially on the services side of the economy. Michael Gapen says the rebound in the labor force, labor participation and net migration played a crucial role in his

Transports would ride the cycle but modes matter Transport metrics had been in an extended downturn for around 18 months. Demand was depressed, inventory levels were high and end demand for goods had faded from COVID highs. But more recently there are signs of stabilization in some of the data tracked by BofA Global Research, partly because trucking supply has been removed. And som

A number of things can go right for Europe Earlier this month, BofA Securities hosted a Global Investor Summit in Rome, Italy. In attendance were corporate executives, prominent investors, policy experts, members of BofA management and several BofA Global Research strategists. Topics ranged from private capital to understanding central banks to the future of Europe. Michael Hartnet

Global growth matters for Emerging Markets At the start of the year, markets were pricing in three rate cuts by June and now, the likelihood of one cut by June is close to 50/50 based on market implied probabilities. But while delayed rate cuts complicate the bull case for Emerging Markets (EM), David Hauner does point out that expectations for cuts have slid partly because of stro

ESG topics still impacting stocks and there's more to come US ESG funds faced a challenging 2023, seeing net outflows of around $7.1 billion, but strong markets meant that assets under management grew strongly. In the US, ESG regulations have historically been market driven, unlike the specific directives in the EU, but more recently the regulatory landscape in the US has seen a fl

Rate policy isn't the only big Fed change likely for '24 Since emerging from the COVID pandemic, the Fed has contracted the size of its balance sheet, also known as Quantitative Tightening (QT). They've done this by allowing their Treasury holdings to mature without reinvesting the proceeds. This has placed upward pressure on yields, all else equal. But the Fed is expected to slow

M&A activity should increase but not everywhere M&A (Mergers & Acquisition) activity had fallen to well-below the 10Y average over the last 2 years. There are various reasons for this slowdown, including higher rates and negative corporate sentiment. But between equity markets faring well over the last year and interest rates off highs, there are some reasons to expect