'Recession is over,' BofA Merrill Lynch tells investors

Clients of Bank of America Merrill Lynch (yes, that mouthful is the brokerage's official name now) can't say the firm is waffling on its economic outlook.

"The recession is over" Merrill declared in a report Tuesday authored by Michael Hartnett, chief global equity strategist.

The brokerage’s famed horned mascot is snorting again: "We are bullish on global equities," Hartnett says in the report.

That might not sound like a surprising call for a major Wall Street player with securities to sell,  but Merrill’s outlook on things in recent years had been extraordinarily dour (as it turned out, correctly so) under two of its long-time strategists: Richard Bernstein and David Rosenberg.

Bernstein, who was chief investment strategist, left in April; Rosenberg, the firm’s chief North American economist, quit in May.

Hartnett had been Merrill’s point man on emerging markets before becoming chief global equity strategist this spring.

His report on Tuesday says the economy has begun a "fragile recovery," but he sees the glass as half-full rather than half-empty: "This means fiscal, monetary and financial policies are likely to remain supportive of asset prices. For example, we forecast the Fed to keep the target [short-term] interest rate close to zero until 2011."

Investors sitting with loads of cash on the sidelines should be moving that money into stocks, Hartnett advises.

"An inflection point in the global economy should encourage investors to rebalance their portfolios to reduce cash and to look for opportunities to increase equity exposure while staying with high-quality bonds," he wrote.

His favorite investment themes include "growth" stocks in emerging markets and "value" stocks in developed markets; the largest U.S. export-oriented companies; "high-quality" technology firms; and investment-grade corporate bonds.

-- Tom Petruno

Photo: The Merrill Lynch bull

Comments

[Michael Snyder]

It's statements like this that show the complete disconnect between Wall St. & Main St. With unemployment at record highs, our manufacturing base overseas, and $8 per hour jobs at Wally World with no benefits have become the gold standard for folks who used to earn $20+ per hour & a health care plan.

Now if you're at Goldman Sachs your recession is over. If anyone has any doubt as to just how the American taxpayers were scammed last fall with Paulson's dire predictions of a "meltdown"; just look at GS in the last 90 days.
Can anybody out there tell me exactly what (if any) benefit the taxpayer reaped for their no interest loan that allowed GS to post that $3.2 billion quarterly profit? Will the taxpayers see any compensation at all? Certainly the ROI to the American people will not equal a single executive bonus at GS this quarter.

I'm still angry at the supreme arrogance of Sen. Fienstein as she stood on the Senate floor and declared, "It's a good thing we're elected every six years so we can do the right thing".
Everybody who voted for TARP should be tried for treason in failing in their fudicary duty to represent the wishes of their constituants who were 200 to 1 against TARP.

The wisdom of our founders has been proven once again. The collective wisdom of the governed trumps the "wisdom" of the governors every time.

[Nikkei 225]

Wishful Thinking: The formation of beliefs and the making of decisions according to what might be pleasing to imagine instead of appealing to evidence or rationality. Also a great song by the eighties band China Crisis.

[Robert NO longer in LA]

ALL these firms contribute NOTHING to real economic growth; they just jury-rig and game the system with speculation, and having enough CLOUT to create and move markets, that most Main Streets would label 'FRONT RUNNING.' And OWNING the US Congress is just Business As Usual....while the ignorant voters, seem to believe 'their' Senator and Congresswoman somehow work for them?????

[pugtv]

I wish people would rant less and make more insightful comments here. There are blogs elsewhere for people to vent their emotions.

[Eurotrash]

Do the previous posters not realize that he is not talking about a overall rebound in the general welfare of the population, he is talking about rebounding ASSET PRICES (big diff).

It is entirely possible that equities can rally while unemployment stays high and people stay underpaid and miserable (stock prices move on earnings, not on happy employees).

Attitudes like the ones posted above give me the confidence to stay long (talk about climbing a wall of worry). I suspect that the previous posters are indeed in cash, so they are effectively the sideline cash that Hartnett is referring to.

[Michael Snyder]

Eurotrash, That "sideline" is comprised of 98% of the population. In case you hadn't noticed; "trickle down economics" is in reality filed under the "wishful thinking" Nikke225 was referring to. In reality the only thing that's trickled down to Main St from "Reganomics" is misery.

All food chains build from the bottom up. The same is true for economic chains. If Joe Sixpack isn't spending; the "investor class" is trading dollars & blowing smoke up their collective a**. Proof of this "theory" is last year's oil bubble which reached unsustainable heights only to crash because the base produce became unaffordable even though it is a "necessity".