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Chart 15: Eurozone PMI's point to solid growth
60.0
58.0
56.0
54.0
52.0
50.0
48.0
46.0
44.0
42.0
40.0
EA Services PMI
EA Manufacturing PMI
Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16
Source: Markit

Chart 16: Japanese growth expected to accelerate in 2017
3.0
2.0
1.0
0.0
-1.0
-2.0
Forecasts
2011 2012 2013 2014 2015 2016 2017
Private demand
Public demand
Net exports
Real GDP growth %YoY
Source: BofA Merrill Lynch Global Research forecasts, CAO

It is a decent global growth picture and it is not impossible to imagine it being still better should the US surprise on the upside and the impact on trade from a Trump presidency prove to be modest.

It certainly fits with the Peak Deflation theme since this stronger growth is expected to be accompanied by a pick-up in inflation. We have core PCE in the US reaching 1.9% next year in our core scenario. Our headline inflation numbers are higher because of the expected increase in the oil price from our commodity strategists. Indeed with oil expected to reach $60pb (OPEC permitting) headline CPI inflation in the US could push 3%. In the Euro Area we see headline inflation rising to 1.2%, albeit with core inflation only nudging modestly higher. UK inflation is expected to move markedly higher care of the lower pound, again with headline inflation pushing towards 3%. In Japan driven by our more optimistic view of the economy we project core CPI at 1%.

Chart 17: BofAML sees GDP accelerating into 2018...
Global GDP growth %
DM GDP growth %
EM GDP growth %
5.1
4.1
4.1
4.7
3.8
3.5
3.2
3.1
2.1
2.1
1.5
1.7
1.9
2015
2016F
2017F
2018F
Source: BofA Merrill Lynch Global Research

Chart 18: ...with inflation picking up too
Global CPI inflation %
DM CPI inflation %
EM CPI inflation %
4.2
3.6
3.6
3.8
2.5
2.4
2.8
3
0.3
0.7
1.7
1.8
2015
2016F
2017F
2018F
Source: BofA Merrill Lynch Global Research

Politics – does populism strike again, this time in Europe?
Few would have predicted both Brexit and a Trump win in 2016. Both had something to do with the Peak Inequality and Peak Globalisation themes. Politicians on both sides of the Atlantic tapped into a deep disquiet, particularly amongst white male blue collar voters that they were not benefitting from this new globalised world. If opinion polls are to be believed (something which we have all learnt to question) then Italy may well end the year with another vote against the governing party - although that one is perhaps a little more complicated to dissect. We recently added a put spread on the eurostoxx to hedge against such a bad outcome here, which would be the case if it is perceived to be

Bank of America Merrill Lynch
Global Cross Asset Strategy – Year Ahead | 30 November 2016 11
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