* Shift back to European equities
The Federal Reserve is likely to raise short-term interest rates later this year; US
stocks are within 5% of our target level, and earnings growth may be scarcer if oil
prices remain low. We are therefore shifting weight from the US to Europe, where
the European Central Bank’s monetary stimulus, combined with credit growth,
should help boost equity market returns. Other global central banks are pursuing
expansive monetary policies.
* Also favor Japan, India, China
Our case for Japan combines improvement in both fundamentals and market
dynamics. For India, the likely drivers are a combination of lower inflation, falling oil
prices, a reform-oriented government and an independent central bank. China
should benefit from a mix of both monetary and fiscal stimulus.
* It’s all about inflation, inflation, inflation
The guest column this month, authored by US Economist Michael Hanson,
examines Fed Chair Janet Yellen’s recent congressional testimony. The Fed
appears focused on inflation as the primary determinant of interest rate policy.
* Global stocks that may benefit from strong dollar
In our ideas section, Strategist Matthew Trapp screens the BofAML Global
Research universe for listed ADRs from favored markets of Japan and Europe that
derive a high percentage of sales from North America. Many of these companies
are likely to benefit as their home currencies weaken vs the dollar.