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Current trade recommendations
Table 1: Current cross asset trades
Asset | Trade idea | Strategist
Equities | Long European Quality Yield Screen (yield) | James Barty
| Long SXDP Index | Ronan Carr
| Long Nikkei | Shusuke Yamada
| Long European index dividend futures | James Barty
| Long MSCI Asia ex-Japan | Ajay Kapur
Equity vol | Long RTY short SPX 2y variance swap | Nitin Saksena
| 3000-2850 SX5E put spread Dec 16 expiry | James Barty
| Long NKY short SPX Dec 18 variance swap | Benjamin Bowler
| Long SX5E short SPX Dec 18 variance spread | Abhinandan Deb
| Eurostoxx 2y/3y put calendar | Abhinandan Deb
FX | Short EUR/SEK | Kamal Sharma
| Long USD/CNY call | Claudio Piron
| Short GBP/USD | Kamal Sharma
| Long USD/AUD | Ian Gordon
| Long RUB/ZAR | David Hauner
Fixed Income | 2s-5s-10s fly | Shyam S. Rajan
| Short US 10y real rates | Shyam S. Rajan
| Paying 5y GBP real rate swap | Mark Capleton
Credit | Buy 30y US IG Industrial spreads | Hans Mikkelsen
| Buy basket of Euro AT1s | Barnaby Martin
| Long Xover short Main | Ioannis Angelakis
Source: BofA Merrill Lynch Global Research. For the full methodology and reference pricing please see Appendices. New trades in bold.

Themes
Long Cyclicality
• Long Asia EM – recovering growth, earnings revisions and cheap valuation.
• Long Nikkei – growth picking up, JPY soft, 20k target.

Long Yield
• Long European dividend yield stocks – 5% yield, big pick up over IG credit.
• Long Dec 18 SX5E dividend future – implies 4% drop from 2016, we see 4% rise.
• Long basket of AT1s – high yield, equity cushion to rise.
• Long XOver short Main – investors’ reach for yield to push them towards Crossover.
• Long basket of 30Y US industrial IG spreads – further spread compression.

Hedge the Fed/Trump
• 2-5-10 fly – 5Y part of the curve looks most vulnerable to Fed hiking.
• Short 10Y real yields – inflation breakevens have adjusted real rates have not.
• Long USD – long via USD/GBP and USD/AUD, we think policy divergence will drive USD stronger if the Fed tightens as our economists expect.
• Long USD/CNH 7.6 6 month call – hedge against trade tensions

Hedge the Rest
• We are long SX5E, NKY and RTY vs SPX variance. Carry positive, convex in a sell-off.
• Long Dec 17/18 SX5E put spread. Long 3000-2850 Dec 16 put spread.

Alpha Trades
• Long European Pharma. Sector discounting no pipeline, valuation back to cheapest since 2011. Solid yield too.
• Paying 5y UK real rates at -254bp. Implied inflation/rates inconsistent.
• Long RUB/ZAR (positive on oil, cautious on S African politics).
• Short EUR/SEK, strong Swedish growth, limiting room for Riksbank easing.

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