Worcester Business Journal February 2016

Transcription

1 Worcester Business Journal February 2016 Karin Kimbrough Head of Macro and Economic Policy, Investment Management & Guidance We re better when we re connected

2 This material was prepared by the Investment Management & Guidance Group (IMG) and is not a publication of BofA Merrill Lynch Global Research. The views expressed are those of IMG only and are subject to change. This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer by any Merrill Lynch entity to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available. Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer and member SIPC, and other subsidiaries of Bank of America Corporation. Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value 2015 Bank of America Corporation. All rights reserved. [ARARJGS6FB]

3 3 Questions Where does the economy go from here? Labor force and demographic trends? What is the Fed going to do?

4 U.S. - Still Growing After All These Years 4.0 Forecast % F 2017F Source: BEA as of November 23, The economic forecasts presented are for informational purposes as of the date of this report. There can be no assurance that the forecasts will be achieved.

5 U.S. Consumers Have Delivered Source: Bloomberg. Data as of December 31, *Household debt service ratio is the ratio of total required household debt payments to total disposable income. Financial obligations ratio is the ratio of mortgage payments, credit cards, property tax, lease payments, homeowner s insurance and rental payments, to total disposable income.

6 U.S. Housing Market is Picking Up Source: Bloomberg. Data as of December 31, 2015.

7 Consumers OK, Firms Less So Consumers Are Still Spending Companies Are Not Source: Bloomberg. Data as of December 31, 2015.

8 An Industrial Sector Recession ISM manufacturing is weak Industrial sector share of the economy is shrinking Shaded Bars are NBER recessions. Source: Institute for Supply Management and Bank of America Merrill Lynch Global Research. Data as of January 22, 2016.

9 Where the Jobs Are and Aren t Source: BLS. Data as of October 15, 2015.

10 A Declining Labor Force Participation Rate 68 Peak in Baby Boomers and Women join labor market en masse Youth go back to school Boomers retiring, but living longer Women having fewer children Source: Both slides: Bureau of Labor Statistics, Merrill Lynch GWRS. Data as of October 2015.

11 Inflation Still Low Source: Bloomberg. Data as of Dec 31, CPI Consumer Price Inflation, PCE Personal Consumption Expenditure. Core inflation measures (CPI and PCE) exclude food and energy prices.

12 Fed Expected to Raise Rates EXTREMELY Gradually Source: BofAML Global Research. The chart plots the fed funds rate target after the first hike. Overnight Index Swap (OIS) rate has been used for the upcoming hiking cycle. Data as of January 11, The economic and market forecasts presented are for informational purposes as of the date of this report. There can be no assurance that the forecasts will be achieved.

13 Rates to stay low for longer 18 % YR Treasury Yield Apr Dec Aug Apr Dec Aug Apr Dec Aug Apr Dec Aug Apr Dec Aug Apr Dec Aug % Forecast Jan Jan Jan Jan Jan Jan Jan Source: U.S. Treasury and Haver. Data as of November 23, The market and economic forecasts presented are for informational purposes as of the date of this report. There can be no assurance that the forecasts will be achieved.

14 USD Could Strengthen Further Dollar Index 90 US Broad Trade Weighted Dollar Dollar Index = U.S. Dollar Spot Index; US Broad Trade Weighted Dollar = a US Dollar index comprised of a basket of the U.S. trading partners, including emerging markets Source: Bloomberg, Federal Reserve, and ML GWM Investment Management & Guidance. Data as of February 4, 2016.

15 TINA Still in Effect ( there is no alternative ) 2500 Forecast: 2200 by end S&P Source: Bloomberg, IMG. Data as of January 12, The economic and market forecasts presented are for informational purposes as of the date of this report. There can be no assurance that the forecasts will be achieved.

16 We re better when we re connected