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Extraction Summary
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People
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Organizations
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Locations
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Quotes
Document Information
Type:
Financial research report / market strategy analysis
File Size:
Summary
This is a page from a Bank of America Merrill Lynch 'European Equity Strategy' report dated December 1, 2016. The text analyzes market trends from 2016, specifically noting the impact of Brexit and Donald Trump's election victory on Financials, Cyclicals, and inflation rates. While the document bears a 'HOUSE_OVERSIGHT' Bates stamp (suggesting it was part of a larger subpoena, likely related to financial investigations involving Epstein), this specific page contains no direct references to Jeffrey Epstein or his associates.
People (1)
| Name | Role | Context |
|---|---|---|
| Donald Trump | President-Elect (at time of writing) |
Mentioned in the context of winning the US election and the market's reaction (reflation expectations).
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Organizations (3)
| Name | Type | Context |
|---|---|---|
| Bank of America Merrill Lynch |
Logo present in footer; creators of the strategy report.
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| Bloomberg |
Cited as the source for Charts 7, 8, 9, and 10.
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| House Oversight Committee |
Indicated by the Bates stamp 'HOUSE_OVERSIGHT_014463' in the footer.
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Timeline (3 events)
Locations (3)
| Location | Context |
|---|---|
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Context of US election, recession fears, and inflation rates.
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Implied by document footer 'European Equity Strategy'.
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Implied by references to 'Brexit'.
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Key Quotes (3)
"The old joke is that Year Aheads are frequently out of date by the end of year they are written in."Source
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Quote #1
"Aside from Brexit and Donald Trump winning the US election it is easy to forget that in February we were worrying about a US recession and deflation."Source
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Quote #2
"Now we are thinking about the reflation under a Trump Presidency."Source
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Quote #3
Full Extracted Text
Complete text extracted from the document (2,304 characters)
Lessons from 2016
The old joke is that Year Aheads are frequently out of date by the end of year they are written in. There is a real danger of that this year given the speed which things have moved since Brexit and more recently the US election. The two charts below show that Financials and Cyclicals have clawed back around 2/3 of their underperformance vs Defensives. Of course it depends how you frame the question since we have included Utilities and Telecoms in the defensive basket. But when we downgraded Banks 10 days or so ago they had outperformed Food and Beverage by ~50% since the lows of early July. Whichever way you cut it some of these moves have been extreme.
The old joke is that Year Aheads are frequently out of date by the end of year they are written in. There is a real danger of that this year given the speed which things have moved since Brexit and more recently the US election. The two charts below show that Financials and Cyclicals have clawed back around 2/3 of their underperformance vs Defensives. Of course it depends how you frame the question since we have included Utilities and Telecoms in the defensive basket. But when we downgraded Banks 10 days or so ago they had outperformed Food and Beverage by ~50% since the lows of early July. Whichever way you cut it some of these moves have been extreme.
Chart 7: The moves since Brexit in both Financials...
[Chart showing Financials vs Defensives relative]
Source: Bloomberg
[Chart showing Financials vs Defensives relative]
Source: Bloomberg
Chart 8: ...and Cyclicals relative to Defensives has been dramatic
[Chart showing Cyclicals vs Defensives relative]
Source: Bloomberg
[Chart showing Cyclicals vs Defensives relative]
Source: Bloomberg
Moreover, in 2016 we doubt that even if investors had known the results of key events that they would necessarily have got the reaction in markets right. As we joked in our Cross Asset year ahead you needed not so much a crystal ball as a time machine to have got things completely right this year. Aside from Brexit and Donald Trump winning the US election it is easy to forget that in February we were worrying about a US recession and deflation. US 5Y5Y forward breakeven inflation rates actually troughed at 1.8% at that point. Four months later we were worrying about the deflationary impact of Brexit. Now we are thinking about the reflation under a Trump Presidency.
Chart 9: US 5Y5Y forward inflation troughed in February
[Chart showing US 5y5y fwd inflation swap]
Source: Bloomberg
[Chart showing US 5y5y fwd inflation swap]
Source: Bloomberg
Chart 10: At the same time as Basic Resources
[Chart showing Stoxx Basic Resources Price Relative]
Source: Bloomberg
[Chart showing Stoxx Basic Resources Price Relative]
Source: Bloomberg
The panic in markets in early February actually presented a perfect buying opportunity for reflationary assets. Miners was a sector truly loathed by investors of all colours at the start of the year with many thinking that some of the big players might even go bust. If there is one key conclusion from all of this it is do not tie yourself to a view. We
4 European Equity Strategy | 01 December 2016
Bank of America Merrill Lynch
HOUSE_OVERSIGHT_014463
Bank of America Merrill Lynch
HOUSE_OVERSIGHT_014463
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