BOA "Next Year 'Interest Rate Shock'... Stock Market Expected to Weaken"

Goldman Sachs and JP Morgan Chase Forecast Bullish Trends

[Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Bank of America (BOA), a U.S. bank, has forecasted a bearish stock market next year and advised investors to hold cash. BOA expects the upward trend in asset prices to break due to inflation and interest rate hikes.

According to Bloomberg on the 22nd, BOA analyzed in a report published that volatility indices, crude oil, energy, the U.S. dollar, and real assets will be promising next year.

While the factors that shocked the financial market were growth rates in 2020 and inflation in 2021, BOA diagnosed that interest rates will be the key factor next year. They predicted that the stock market will show weakness due to interest rate hikes, making cash holdings a hot topic.

BOA's view contrasts with those of Goldman Sachs and JP Morgan Chase, who expect the stock market to remain strong next year.

BOA also anticipated that if the U.S. central bank, the Federal Reserve (Fed), continues to keep real interest rates low, a bullish stock market would be possible.

Regarding financial market bubbles, BOA pointed out that fat tail risks remain in cryptocurrencies and tech stocks. Fat tail risk is a concept similar to a black swan, referring to risks that have a very low probability of occurring but are difficult to predict, and thus can cause significant shocks if they happen.

This content was produced with the assistance of AI translation services.