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BofA’s top 10 deals for 2023


Empty asphalt road and new year 2023 concept. Driving on empty road to Goal 2023 when the sun goes down.

a turtle

Next year, the US will experience a mild recession with the fund’s lending rate tipped to peak at 5.25%, and the Fed will finally cut it in December, according to BofA strategists.

Stocks will move sideways and the S&P 500 (SP500) (NYSEARCA:spy) will end in 2023 at 4,000, Michael Hartnett and team wrote in a note.

“We keep the risk asset bearish in the first half, potentially turning bullish in the second half,” Hartnett said.

“We are buying U.S. Treasuries in H1” with “hard landings and undervalued credit event risk,” added Hartnett, while maintaining optimal S&P entry points of “nibble.” at 3,600, “bite” and 3,300 and “gorge” at 3,000.

Here are their top 10 deals for 2023:

  1. 30-year long-term treasury (US30Y) (TBT) (TLT) “on recession, unemployment, Fed cuts late’23, history (US Treasury returns have never fallen for 3 consecutive years).”
  2. The yield curve is steeper “because the US yield curve is always sloping up when a recession starts and the market predicts the Fed will move from raising rates to cutting.”
  3. Short US Dollar (U.S. DOLLAR) (DXY) (UDN), long-term emerging market assets (EEM) (SPEM) (women), long EM distress bond of the Korean won long when China reopens, Mexican peso long when “nearshoring”.
  4. Chinese stocks long (MCHI) (Forex) as “The post-COVID reopening has boosted US/EAFE stocks, China has high ‘excess savings’ and China stocks remain in contrarian long-term trade. “
  5. Buy Gold (XAUUSD) (GLD) (IAU), long copper (HG1:COM) (COPX) on “US Dollar Peak, China reopening, metals inventory shortage, accelerating energy transition, inflation hedge demand in the 2020s.”
  6. Barbell credits with “over-consensus long-term credit in ’23, we eliminate long-term IG tech bonds (yield >5% + strong balance sheet) with hard-hit HY debt in Europe Asia (17% yield).”
  7. Long-term global industries (XLI) and small caps (IWM) on “the shift of secular leadership in the 2020s from deflation to inflationary assets, due to globalization to localization, from monetary excess to fiscal, inequality to inclusion, etc
  8. Short-term US technology (XLK) (XLC). “Old leadership, still over-owned, QE era gone, globalization era gone, plus highest regulatory and penetration risks.”
  9. Short-term private equity (PSP) with “acquisition risk due to shadow banking exposure to credit and housing risk.”
  10. EU long banks, short banks of Canada, Australia, New Zealand and Sweden. “EU financial stimulus to help the Eurozone get rid of Russia’s energy dependence, China’s export dependence, the US military’s dependence compared to the collapse of the real estate market in Canada/Australia/NZ/Sweden.”

See the big catalysts for stock this week.

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