Modest stock-market gains in 2021 risk disappointing bullish investors: BofA - Business Insider

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Modest market returns in 2021 risk disappointing today's overexcited investors, Bank of America says

Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.Vaccine distribution and healthy economic growth might not yield the market returns investors are clamoring for next year,The bank's Research Investment Committee expects the US to lag the global economy in 2021 growth and for markets to post "modest" gains amid the weak recovery.

Vaccination, stimulus rollout, and market rallies will lead Congress to tighten fiscal conditions and hamper a prolonged rally for risky assets and broad indexes, the firm added.Widespread vaccination against COVID-19, an economic recovery, and rebounding corporate profits might not be enough to appease investors,The bank's Research Investment Committee expects economic growth to bounce back in 2021 as vaccinations allow for more thorough and faster reopenings.

For one, vaccine hopes recently pushed the bank's gauge of Wall Street optimism to its highest point since the financial crisis. The indicator now sits at 57.8%, just 2.7 points away from sending a signal for investors to sell. A record-high $14 billion flow into value ETFs from growth funds in recent weeks further reveals the overwhelming bullishness among investors.

For now, bad news is good news, the bank's strategists said. Soaring COVID-19 case counts and weakening economic data places greater pressure on Congress to pass a large stimulus package. That narrative changes next year, when vaccine distribution, stimulus rollout, and market rallies can lead lawmakers to tighten fiscal conditions and focus on repaying government debt.

 

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