Investment Strategies

Merrill Lynch GWM Smiles On Equities, Frowns On Government Bonds

Harriet Davies 21 October 2009

Merrill Lynch GWM Smiles On Equities, Frowns On Government Bonds

Merrill Lynch Global Wealth Management maintains a bullish stance on equities in its chief investment office’s quarterly outlook, and expects solid economic growth over the next few months as governments continue aggressive stimuli.

The US firm sees value in cyclical markets, particularly equities, driven by a liquidity boom and stronger than expected corporate profits in the second half of the year. It also sees small-caps and emerging markets as sources of growth.

Regionally, Merrill Lynch GWM supports Asia Pacific ex-Japan – a strategy currently favoured by other investment houses – and prefers UK to euro-zone equities.

It thinks commodities are fairly valued, preferring metals to energy, with gold offering a long term hedge against policy mistakes; a concern when policies are made in unfamiliar market conditions.

Despite a gradual rise in bond yields, it sees a positive performance on corporate bond yields as still possible.

The investment outlook cites a sharp dollar weakening and changes in government or monetary policies as potential threats to the markets. It says rising unemployment and weakening core inflation mean interest rates across the group of seven rich nations are expected to remain low for the time being, but that markets are increasingly on interest rate watch for any signs of monetary policy tightening.

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