Stock market growth in the U.S. and globally tracked overall growth, according to Chris Hyzy, chief investment officer for Bank of America Global Wealth & Investment Management.
Hyzy said in a midyear video update on the economy, markets and Washington that the markets’ focus on corporate profits drove growth in the first half of the year.
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“Our view is that the profit cycle is the bedrock to this expansion,” he said in the video. “We expect the profit cycle in the United States and globally to continue to gather momentum. It may slow down off of the first-quarter hyper-growth that we saw in terms of 15% in the United States, but slowing down isn’t necessarily a bad thing when you look at the full trend.”
He expects interest rates and equities to rise, with non-U.S. growth bringing a “surprise to the upside.”
Karin Kimbrough, head of investment strategy for Merrill Lynch Wealth Management, noted that consumers and businesses are more confident, not just in the U.S. but globally.
Kimbrough believes the Fed will raise rates one more time this year, and is “looking for another round of three rate hikes next year in 2018, if all goes … according to plan.”
Kimbrough noted her growth expectations are even without “heroic changes in Washington.”
Hyzy believes policies like tax reform, health care reform and an infrastructure bill from the Trump administration would support growth and “are likely late 2017, early 2018.”
Ultimately, Hyzy said, “pro-growth policies are needed across the board to get the economy back to an accelerated rate that will allow a widening of the base across the board at all segments of the U.S. economy.”
Kimbrough pointed to the financials and health care sectors as areas of opportunity. Financials have picked up as people realize that “banks do better when the yield curve steepens, but banks do better just when the rates rise.”
She added that fewer regulations and “a lighter touch and a lighter approach to interpretation of existing regulations” will also be favorable.
In health care, Kimbrough said pharmaceuticals, hospitals and biotech all add to opportunities in the sector.
More long term, technology is a good opportunity because “it crosses almost every other sector. Every business in business today has a technology aspect, so tech is huge in the long-term growth theme.”
— Read NY Fed President Sees Moderate Growth and Higher Inflation Ahead on ThinkAdvisor.