BoA says ultimate low for risk assets in 2022 not yet in place

Strategists at Bank of America told clients that the ultimate low for risk assets in 2022 had not yet been seen, notwithstanding the recent "violent" bear market rally triggered by cease-fire talks between Russia and Ukraine.

They also noted that if US growth stocks were excluded, then global stockmarkets, using the ACWI index ex-US growth as a proxy, were in fact trading just 5.0% above the highs that they reached in 2007.

In parallel, the BofA Global Financial Stress Index has registered its largest fourth largest spike for over the past two decades, due to volatility and solvency risk.

Yet whereas in the prior four episodes that had led to policy easing that was not the case this time around, they said.

Furthermore, the BofA Global EPS model was pointing to negative earnings per share growth by late summer.

Flat S&P 500 EPS of $210 together with an EPS multiple of 19.0-20.0 would equate to the benchmark index trading at around 4,000-4,200 points.

If EPS growth turned negative however, then that implied a decline below 4,200 points.

And yet, "if" credit outflows continued and equity breadth remained poor then in the coming weeks their Bull&Bear indicator might give a contrarian 'buy' signal.

Since 2013, on the eight occasions on which it had given a 'buy signal', over the subsequent 12 weeks the ACWI had delivered a median return of 8.0%.