Bank of America Warns Investors of Economic ‘market or macro shock’ in Mid-2015
Most who are aware of more than Taylor Swift and the NBA playoffs are probably cognizant of the financial woes that face the country and the world. An economic collapse has seemed to be on the horizon for some time and every day draws us closer to the reality. Today, Bank of America warned its investors to keep higher than normal levels of cash and gold by mid-2015.
The note states:
Investors remain trapped in “The Twilight Zone”, the transition period between the end of QE and the first rate hike by the Fed, the start of policy normalization…until (a) the US economy is unambiguously robust enough to allow the Fed to hike and (b) the Fed’s exit from zero rates is seen not to cause either a market or macro shock (as it infamously did in 1936-7), the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes. For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid 2015. Given extremities of liquidity, profits, technological disruption, regulation, income inequality…potential for a cleansing drop in asset prices cannot be dismissed. Most likely catalysts: Consumer, Rates, A-shares, Speculation, High Yield.
It’s financial speak for “don’t panic, but be ready to bolt” when the financial crisis truly hits its stride. Moreover, the emphasis on quantitative easing versus a rate hike gives us the potential catalyst. There are so many possibilities, but this is arguably the most worrisome because it’s completely man-made based upon decisions of people who may or may not have the right intentions in mind.
The biggest problem here is that this makes it clear that even investors are in the dark. The trends point towards positive sentiment in the economy. That’s why BofA put out the memo. They are wanting their investors to understand that the glory days are about to come crashing back down more quickly than we’ve seen before. I’m not posting this to spread fear. This is a call to be mindful, to put your money in the right places, and most importantly to pray for help. It seems to be our of our hands completely.