BofA Merrill Lynch Global Research 2013 Market Outlook: 10 Macro Investment Trends for the Year Ahead

  BofA Merrill Lynch Global Research 2013 Market Outlook: 10 Macro Investment
  Trends for the Year Ahead

                   Firm Releases Annual Year Ahead Outlook

Business Wire

NEW YORK & LONDON -- December 11, 2012

BofA Merrill Lynch Global Research today released its 2013 Year Ahead market
outlook, saying that a cloud of uncertainty is likely to overhang the markets
through a painful and protracted resolution of the U.S. fiscal cliff. However,
global economic growth is expected to pick up steam in the second half of the
year, ultimately surprising on the upside and pushing the S&P 500 Index to
1600, a new all-time high.

At the annual BofA Merrill Lynch 2013 Year Ahead outlook news conferences in
New York and London, analysts from the top-ranked global research firm said
the year ahead could be “lucky ’13” for cautious, savvy investors. The
beginning stages of a great rotation in the markets create opportunities for
cyclical and undervalued asset classes poised for recovery.

“This time last year, the risks to global growth were to the downside as the
European debt crisis, China hard landing fears and the U.S. fiscal cliff
clouded the economic outlook,” said Michael Hartnett, Chief Investment
Strategist at BofA Merrill Lynch Global Research. “For 2013, we expect the
resolution of fiscal policy issues, another year of accommodative central bank
actions and improving corporate profits to skew the macro and market risks to
the upside.”

BofA Merrill Lynch analysts outlined 10 macro calls on which they are basing
their 2013 outlook. Detailed highlights of BofA Merrill Lynch 2013 Year Ahead
outlook report can be found here, at

  *The global economy grows 3.2 percent, gradually improving through the
    year, led by China and the U.S. Resolution of the fiscal cliff in the U.S.
    and successful negotiation of aid to Spain, combined with high liquidity
    and low commodity prices, should support a gradual improvement in global
    business and consumer spending through the year. By the end of 2013,
    growth is expected to rise to 2.5 percent in the U.S. and 8 percent in
  *Fiscal austerity in the U.S. and Europe offsets monetary stimulus from
    central banks. Monetary easing may not be enough to offset fiscal
    contraction in the first part of the year. Fiscal austerity in Europe and
    in the U.S. – the latter by as much as 2 percent of GDP – is likely to be
    a drag on growth.
  *The U.S. housing recovery builds momentum. U.S. home prices are expected
    to rise another 3 percent in 2013, adding to the 5 percent gain in 2012.
    Housing starts could increase by more than 25 percent and a 3.5 percent
    average annual appreciation over the next 10 years should stimulate jobs
    to construction and related sectors such as furniture, building materials
    and financials.
  *Flares, not wildfires in Europe. With support to Spain from the European
    Central Bank, the European economy should stabilize as the year
    progresses. Despite a series of episodic flare-ups of the ongoing crisis
    in Europe, the big tail risk of a Eurozone breakup has likely passed.
  *China should lead emerging market growth. Against a backdrop of subdued
    growth in developed markets, GDP growth in emerging markets is expected to
    recover to 5.2 percent, led by the BRIC economies, particularly China.
    However, rising inflation could leave emerging market policymakers with
    little room to ease.
  *Global equities should be the best-performing asset class. Powerful policy
    support, reasonable valuations and receding tail risks should help make
    global equities the best performing asset class in 2013. The U.S.,
    European and Asian equity markets could see gains of 10 percent to 16
    percent next year, with the MSCI AWI reaching 370 and the S&P 500 Index
    reaching a new all-time high of 1600 by year-end.
  *Interest rates and currencies. The U.S. dollar and Euro could rally on the
    global recovery and greater fiscal clarity, pushing the yen lower and
    emerging market currencies higher.
  *High yield and emerging market bonds should outperform corporate credit.
    On the heels of record-low yields in 2012, U.S. investment-grade corporate
    bonds are likely to offer scant returns of 1.6 percent in the year ahead,
    but high yield bonds could return up to 7.0 percent and emerging market
    bonds could return 10.1 percent.
  *Fixed Income: Government bond yields should rise modestly. G3 central
    banks are expected to maintain their zero-interest rate policies.
    Government bond yields in the U.S., U.K. and Germany are expected to rise
    modestly to 2.0, 2.5 and 1.5 percent, respectively, translating into total
    returns for major government bond markets of roughly -3 percent to +2
  *Commodities: Gold could rise to $2,000 per ounce. Large-scale policy
    easing by the U.S. Federal Reserve and European Central Bank positions
    gold as a useful hedge against global macro and inflation risks.

The Research Investment Committee of BofA Merrill Lynch Global Research
provides 10 Investment Ideas for 2013, including recommendations for investors
to approach the markets tactically. Highlights can be found here at

BofA Merrill Lynch Global Research

The BofA Merrill Lynch Global Research franchise covers more than 3,300 stocks
and 1,060 credits globally and ranks in the top tier in many external surveys.
Most recently, the group was named Top Global Research Firm of 2011 by
Institutional Investor magazine; No. 1 in the 2012 Institutional Investor
All-Asia survey for the second consecutive year; No. 2 in the 2012
Institutional Investor All-China, All-Europe, All-Japan and All-Latin America
surveys; and No. 3 in the 2012 Institutional Investor All-America survey. The
group was also named No. 2 in the 2012 Institutional Investor All-America
Fixed Income survey, as well as in the inaugural Institutional Investor
Emerging Markets Equity and Fixed Income survey, covering Emerging Europe,
Middle East and Africa.

Additionally, BofA Merrill Lynch Global Research was named the No. 1 Global
Broker by Financial Times/StarMine,as well as rankedNo. 1 in the U.S. and
Europe and No. 2 in Asia. The group was also named No. 1 in Asia and No. 2 in
the U.S. in the Wall Street Journal Best on the Street 2012 Analysts Surveys.
The group was also the winner of the Emerging Markets magazine’s EM Research
Global Award for 2010 and 2011.

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