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Like several other Wall Street analysts, Bank of America Merrill Lynch also sees an upbeat 2018 for stocks. But this optimism is being felt only for the first half, following which the markets may be apprehensive of a rough patch.
Bank of America Merrill Lynch believes that the S&P 500 would top 2,863, marking an about 11% ascent from Nov 20’s close. Bond yields are also expected to soar higher, with the benchmark 10-year Treasury note hitting 2.75%. Global GDP growth will likely be 3.8%.
Bank of America Merrill Lynch’s chief investment strategist Hartnett indicated that the ongoing bull market “will be the longest in history if it continues to Aug 22, 2018, while the outperformance of stocks versus bonds, at seven years running, would be the longest streak since 1929.”
However, one factor that could derail the bull momentum is tepid wage inflation. As of now, Bank of America Merrill Lynch estimates that wages “could rise 3.5 percent and push the consumer price index up 2.5 percent.”
But if wage growth does not come across, "the era of excess liquidity" will be prolonged, bond yields would nosedive and the Nasdaq tech barometer would jump higher. That in turn would create a bubble that “might not end until 2019, when a bear market would be triggered by "hostile Fed hiking, Occupy Silicon Valley and War on Inequality politics."
A change from passive to active in investor allocations would signal that the rally will die. Bank of America Merrill Lynch is ready to "downgrade risk aggressively" once such signs are prevalent.
Along with this theory, Bank of America Merrill Lynch also highlights some favored investment areas for 2018, including technology, homebuilders, Japanese banks and the dollar against the Swiss franc.
Quite expectedly, investors can very well play these investment ideas with ETFs, at least in the first half of 2018.
We pick this social media ETF from the tech clan. The fund tracks the Solactive Social Media Total Return Index. The surge of activity in the social media space is one of the key reasons why the fund can do well in 2018 (read: Buy 5 Top-Ranked ETFs on High P/E for Further Gains).
Home building in the United States jumped to a 12-month high in October, going by the Commerce Department data released on Nov 17. Existing home sales too rose more than expected in October as the hurricane-induced upheaval ebbed. Probably, the need for more home construction (thanks to the devastation in hurricanes) helped the sector in October. The fund gives solid exposure to stocks like D R Horton (13.4%), Lennar (9.9%) and NVR (9.5%).
WisdomTree Japan Hedged Financials Fund
The underlying index of the fund looks to provide exposure to financial companies in Japan, while at the same time hedge exposure to fluctuations between the value of the U.S. dollar and the Japanese yen. Regional banks take about 33% of the fund followed by diversified banks (18.7%), property & casualty insurance (18.2%) and life & health insurance (10.4%).
The fund seeks to deliver twice the returns of the index, charging investors 0.89% in expense ratio. However, this pick is for the first half only (read: S&P 500 to Hit 2800 in 2018? Play These ETFs).
AdvisorShares Madrona Domestic ETF
This actively managed fund selects a pool of up to 500 of the largest U.S. traded equity securities using a weighted allocation system based on consensus analyst estimates of the present value of future expected earnings relative to the share price of each security. This could be a goof pick if the market falters.
Fidelity Nasdaq Composite Index Tracking Stock (ONEQ - Free Report)
Be it a bull or bear market, the future of Nasdaq looks bright. Solid earnings of tech companies. solid global growth and new oppositeness in the tech space will likely keep this tech-heavy fund healthy. Information Technology holds about 50.5% of the fund followed by Consumer Discretionary (16.9%) and Health Care (11.4%).
Solid global growth makes it sensible to bet on this global ETF. The fund is an actively managed portfolio of companies from around the world, selected by using the time-tested Davis Investment Discipline. United States holds around 51.5% of the fund followed by emerging markets (36.2%) and developed Ex-U.S. (12.3%).
If bond yields continue to rise, there will be acute need for an investment instrument that could save investors from rising rate threats. The fund yields 5.77% annually (as of Nov 22, 2017) (read: Follow Goldman With These ETFs for 2018).
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Prepare for 2018 With These ETFs
Like several other Wall Street analysts, Bank of America Merrill Lynch also sees an upbeat 2018 for stocks. But this optimism is being felt only for the first half, following which the markets may be apprehensive of a rough patch.
Bank of America Merrill Lynch believes that the S&P 500 would top 2,863, marking an about 11% ascent from Nov 20’s close. Bond yields are also expected to soar higher, with the benchmark 10-year Treasury note hitting 2.75%. Global GDP growth will likely be 3.8%.
Bank of America Merrill Lynch’s chief investment strategist Hartnett indicated that the ongoing bull market “will be the longest in history if it continues to Aug 22, 2018, while the outperformance of stocks versus bonds, at seven years running, would be the longest streak since 1929.”
However, one factor that could derail the bull momentum is tepid wage inflation. As of now, Bank of America Merrill Lynch estimates that wages “could rise 3.5 percent and push the consumer price index up 2.5 percent.”
But if wage growth does not come across, "the era of excess liquidity" will be prolonged, bond yields would nosedive and the Nasdaq tech barometer would jump higher. That in turn would create a bubble that “might not end until 2019, when a bear market would be triggered by "hostile Fed hiking, Occupy Silicon Valley and War on Inequality politics."
A change from passive to active in investor allocations would signal that the rally will die. Bank of America Merrill Lynch is ready to "downgrade risk aggressively" once such signs are prevalent.
Along with this theory, Bank of America Merrill Lynch also highlights some favored investment areas for 2018, including technology, homebuilders, Japanese banks and the dollar against the Swiss franc.
Quite expectedly, investors can very well play these investment ideas with ETFs, at least in the first half of 2018.
Global X Social Media ETF (SOCL - Free Report)
We pick this social media ETF from the tech clan. The fund tracks the Solactive Social Media Total Return Index. The surge of activity in the social media space is one of the key reasons why the fund can do well in 2018 (read: Buy 5 Top-Ranked ETFs on High P/E for Further Gains).
The fund gives solid exposure to stocks like Tencent Holdings (11.45%), Twitter (10.14%) and Facebook (9.86%) (read: Top-Ranked Tech ETFs to Buy on Facebook's Robust Q3).
iShares U.S. Home Construction ETF (ITB - Free Report)
Home building in the United States jumped to a 12-month high in October, going by the Commerce Department data released on Nov 17. Existing home sales too rose more than expected in October as the hurricane-induced upheaval ebbed. Probably, the need for more home construction (thanks to the devastation in hurricanes) helped the sector in October. The fund gives solid exposure to stocks like D R Horton (13.4%), Lennar (9.9%) and NVR (9.5%).
WisdomTree Japan Hedged Financials Fund
The underlying index of the fund looks to provide exposure to financial companies in Japan, while at the same time hedge exposure to fluctuations between the value of the U.S. dollar and the Japanese yen. Regional banks take about 33% of the fund followed by diversified banks (18.7%), property & casualty insurance (18.2%) and life & health insurance (10.4%).
ProShares Ultra S&P500 (SSO - Free Report)
The fund seeks to deliver twice the returns of the index, charging investors 0.89% in expense ratio. However, this pick is for the first half only (read: S&P 500 to Hit 2800 in 2018? Play These ETFs).
AdvisorShares Madrona Domestic ETF
This actively managed fund selects a pool of up to 500 of the largest U.S. traded equity securities using a weighted allocation system based on consensus analyst estimates of the present value of future expected earnings relative to the share price of each security. This could be a goof pick if the market falters.
Fidelity Nasdaq Composite Index Tracking Stock (ONEQ - Free Report)
Be it a bull or bear market, the future of Nasdaq looks bright. Solid earnings of tech companies. solid global growth and new oppositeness in the tech space will likely keep this tech-heavy fund healthy. Information Technology holds about 50.5% of the fund followed by Consumer Discretionary (16.9%) and Health Care (11.4%).
Davis Select Worldwide ETF (DWLD - Free Report)
Solid global growth makes it sensible to bet on this global ETF. The fund is an actively managed portfolio of companies from around the world, selected by using the time-tested Davis Investment Discipline. United States holds around 51.5% of the fund followed by emerging markets (36.2%) and developed Ex-U.S. (12.3%).
iShares U.S. Preferred Stock ETF (PFF - Free Report)
If bond yields continue to rise, there will be acute need for an investment instrument that could save investors from rising rate threats. The fund yields 5.77% annually (as of Nov 22, 2017) (read: Follow Goldman With These ETFs for 2018).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>