See all our latest ISO updates below.

2017 Year Ahead: A World Of Change

The Investor Strikes Back!
We expect business, consumer and investor confidence to continue to head higher well into 2017 (with most of the newly expected growth to come in 2018), which should underpin equities for most of the year
Christopher Hyzy
Chief Investment Officer, U.S. Trust

Looking back over the years at some of the Year Ahead thoughts they ranged from the Year of Deleveraging in 2008, Crossing The Rubicon in 2010, Where the Buffalo Roam in 2015 and in early last December when we published the Year Ahead for 2016 we envisioned a "grind it out year" that had the potential to produce 7-8% returns (before dividends) in US equities and contain more episodic volatility versus a consistently elevated level. We called 2016 The Twilight Zone: A new dimension brings new complexities, but economic growth and equities should edge higher. As we close out the year it may appear that we did indeed experience "The Twilight Zone" with a strange end to this year at or close to all-time highs on the major indices.

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October 2016 ISO: A Bridge to the Other Side

Economic indicators suggest that it is too early for a cyclical bear market, and equities should remain on a longer-term uptrend as U.S. and global expansions gradually continue.
Christopher Hyzy
Chief Investment Officer, U.S. Trust

This business expansion is now about 88 months long. If we continue to grind along for the next two or three years the length of this cycle will rival the longest expansion on record, that of the 1990s. Simply put, we are on a bridge to the other side.

This expansion has been characterized by below-average growth, low-to-little inflation, good but second-guessed job growth, very accommodating central banks with experimental policies, demographic shifts, elevated geopolitical risks, a boom-bust oil cycle, a long bear market in the emerging markets, anemic corporate revenue growth, a significantly consistent stock buyback wave, a herd-like advancement toward "yield" and government bond yields that broke the zero line in approximately one third of the world. However, world-developed equity markets have powered through most of this for the better part of the last seven years.


2016 Mid-Year ISO: For What It's Worth...

There's something happening here
One positive from the Brexit vote is that it could potentially be the event that breaks the fiscal impasses that have existed in many parts of the world, including the U.S., for a very long time.
Christopher Hyzy
Chief Investment Officer, U.S. Trust

In 1967, the band Buffalo Springfield released a song called "For What It's Worth." The song opens with the line, "There's something happening here, what it is ain't exactly clear." As we move into the second half of 2016, our effort to determine "what's happening here" in the U.S. and around the world will focus on the Brexit vote and its potential impact on global markets, which even before Brexit were undermined by weak business investment and dominated by central bank policies.

In our year-ahead report released late in 2015, we characterized 2016 as the year of The Twilight Zone. The Twilight Zone's Season Four episodes opened by informing viewers they would be "moving to a new dimension of shadow and substance." We expected 2016 to be a year in which "shadow," essentially exaggerated worries rooted in fear of the unknown, would play a larger role in driving the markets than "substance," corporate earnings, economic growth rates and other empirical data.

Our view was that the disequilibrium between shadow and substance would create episodic volatility across financial markets. This is precisely what happened during the first two months of 2016 (and now in this "ain't clear" period) when four main concerns created a risk-off environment across the globe. These concerns centered on:

  • China's new foreign exchange policy and its overall growth curve
  • The large downdraft in oil prices and worries about a stronger dollar
  • The possibility of a recession in the U.S.
  • The prospects for negative interest rates in the U.S.


Mid-year update: What's Next for the Markets & Economy

In this new video, Chris Hyzy, CIO for Global Wealth & Investment Management at Bank of America, joins a panel of our leading strategists to discuss the volatility that marked the first half of the year and the areas of opportunities his team has identified for the rest of 2016 and beyond.

2016 April ISO: Forget Jack, Focus on Charlie-in-the-Box

Misfit toys, new normals and emerging opportunities.
Since we are expecting the market to grow tired, we would own dividend growth and solid dividend payers around twice the yield of 10-year treasuries. In other words, we still prefer our theme of 'getting paid to wait.'
Christopher Hyzy
Chief Investment Officer, U.S. Trust

We've been writing about the global growth shift from the developed world to the developing world for some time now. But within that broad, massive shift are many others. Demographics are shifting— some societies are aging, others, like the emerging markets (EM), are growing a vibrant middle-class with pent-up demand. Central bank policies are increasingly playing the role that fiscal policy filled in previous cycles. Innovative technologies are causing numerous disruptions, lowering barriers to entry and creating commoditized pricing in areas that have been accustomed to pricing power. Consumer spending patterns are shifting as well, from goods to services and experiences. And then there's the shift in oil from higher to much lower prices, shifts in geopolitics, including the upcoming shift in leadership in the U.S., and many, many others.

What do these shifts have to do with the Island of Misfit Toys, which featured in the 1964 stop-motion classic "Rudolph the Red-Nosed Reindeer"? Well, the island's unwanted toys— including not a Jack-in-the-Box but a Charlie-in-the-Box, an ostrich-riding cowboy and a water pistol that shoots jelly—weren't really misfits; they were just different from what was perceived to be normal. These global shifts are like those unusual toys. They represent the new and different. Now, all of these shifts—these breaks from the recent past—aren't negative, but they do cause disruptions, concern and potential unintended consequences. Some successful areas of past cycles become obsolete, even as new areas emerge, grow successful and lead to new opportunities. These days, many of the new areas of opportunity are centered on the knowledge-based, capital-light economy rather than the production-based, goods-based, capital-heavy economy of the past.

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