President Barack Obama
signs into law a bill,
December 17, 2010,
extending Bush-era tax cuts
and other benefits based
on a deal he brokered with
Republicans that angered
liberals. The recent tax
package has been a game
changer in many ways
February 25, 2011
Be it the affluent pre-retiree, small
business owner, or corporate executive, all investors have different
needs. To help address those varied and
unique needs, my articles, published
over the past months, have focused on
instilling positive financial know-how
for the next generation and investing in
emerging markets. In this month’s column, I will share insights for the 2011
outlook according to BofA Merrill
Lynch Global Research.
income returns over the next year.
Our economists believe fixed
income returns will be modestly
negative this year. Although you
will continue to receive the
coupon payments on your bond,
the value of the bond may decline
as rates rise. Hence, it is impor-
tant to pay attention to the maturity and duration of your fixed
The recent tax package signed into law
by President Barack Obama has been a
game changer in many ways. Because of
this, Merrill Lynch economists sharply
revised their estimate for gross domestic
product growth in the United States this
year from 2.3 percent to 2.8 percent.
Municipal bonds: Our economists believe municipal bonds
will perform well, as they are currently undervalued and are trading at a significant discount to A-rated corporate bonds. However,
This bill adds more than $400 billion to
the budget deficit this year and in 2012.
What does this mean for investors in 2011?
How should you position your portfolio to
optimize the return on your assets?
outlook for 2011
it is important to pay attention to
credit quality and average maturity.
spending, which will continue to be
restrained by the persistently high unemployment rate. At the same time, core
percent, consequently accounting for an
excess of three-quarters of the global GDP
growth in the year.
Let’s briefly examine BofA Merrill Lynch
Global Research’s 10 major themes for
inflation is expected to remain at a remarkably low level of 1 percent over the coming
Credit spreads: BofA Merrill
Lynch Global Research Credit Strategist
Jeff Rosenberg believes that high yield and
emerging market bonds will do reasonably
well this year, due to a narrowing of spreads
versus US treasuries. These sectors may
US economic growth: The BofA Merrill
Lynch Global Research Investment
Committee believes the US economy will
see a boost as a result of the tax bill. Capital
spending will be stronger than consumer
Global economic growth: Our economists
predict that the global GDP growth will
slow from 4.9 percent to 4.2 percent in
2011. However, we do believe emerging
market growth will remain robust at 6.4
Fixed income: In view of the revised economic growth estimates, BofA Merrill
Lynch Global Research’s economists now
expect long-term interest rates, as measured by the 10-year treasury bond, to rise to
4 percent by the end of 2011; this is up from
the previous estimate of 3.25 percent.
be the bright spot in the fixed income
US equity market: BofA Merrill Lynch
global research chief equity strategist
This does not bode well for overall fixed
On April 19, 2010, Barron’s published its Top 100 Advisors ranking, which
reflects the volume of assets overseen by the advisors and their teams, revenues
generated for the firms and the quality of the advisors’ practices. The scoring
system assigns a top score of 100 and rates the rest by comparing them with
the top-ranked advisor. Investment performance is not an explicit criterion,
because many advisors don’t have audited results, and their clients have a wide
variety of investment goals, from conservative to aggressive.
Investing involves risks.
Certain of the material presented here can be considered a research report
and is to be considered general information only. Neither it nor any opinion
expressed constitutes an offer to buy or sell any securities or other investments.
The investments or strategies presented do not take into account the investment
objectives or financial needs of particular investors. It is important that you
consider this information in the context of your personal risk tolerance and
investment goals. Neither the information nor any opinion expressed constitutes
a specific recommendation or a solicitation by BofA Merrill Lynch Global
Research to buy/sell any securities or commodities. Past performance is no
guarantee of future results.
Bond values fluctuate in price so the value of your investment can go down
depending on market conditions. The two main risks related to fixed-income
investing are interest rate risk and credit risk. Typically, when interest rates
rise, there is a corresponding decline in the market value of bonds. Credit risk
refers to the possibility that the issuer of the bond will not be able to make
principal and interest payments. There may be less information available on the
financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable
bonds. A portion of the income may be taxable. Some investors may be subject
to Alternative Minimum Tax (AMT).
Any information presented is general in nature and is not intended to provide
personal investment advice. The investment strategies presented do not take into
account the investment objectives or financial needs of particular investors. It is
important that you consider this information in the context of your personal risk
tolerance and investment goals.
Investment in commodities and gold are investments in natural resource
industries that can be significantly affected by events relating to those industries
such as variations in commodities markets, weather, embargoes, disease, inter-
Raj Sharma, managing direc-
tor, investments, is a private
wealth advisor for the Private
Banking and Investment Group
at Merrill Lynch in Boston.
Sharma has earned recogni-
tion as one of Barron’s “Top
100 Financial Advisors” in
2010. This is the seventh
Sharma was selected
for this honor. He can be
reached at (800) 926-
national, political and economic developments, the success of exploration projects, tax and other government regulations, as well as other factors.
Concentrating investments in gold companies means that performance will be
more susceptible to factors affecting that particular sector.
International investing presents certain risks not associated with investing
solely in the U.S. These include, for instance, risks related to fluctuations in
value of the U.S. dollar relative to the value of other currencies, custody
arrangements made for a fund’s foreign holdings, political and economic risk,
differences in accounting procedures, and the lesser degree of public information
required to be provided by non-U.S. companies. Foreign securities may also be
less liquid, more volatile and harder to value, and may be subject to additional
risks relating to U.S. and foreign laws relating to foreign investment. These
risks are heightened when the issuer of the securities is in a country with an
emerging capital market.
Opinions are subject to change due to market fluctuations. Investing involves
risk. Investing in securities can result in a loss. Investments in foreign securi-
ties involve special risks, including foreign currency risk and the possibility of
substantial volatility due to adverse political, economic or other developments.
These risks are magnified for investments made in emerging markets. .
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legal advice. Any information presented about tax considerations affecting
client financial transactions or arrangements is not intended as tax advice.
Any tax statements contained herein were not intended or written to be used,
and cannot be used for the purpose of avoiding U.S. federal, state or local tax
penalties. Please consult your own independent advisor as to any tax, account-
ing or legal statements made herein. Investors should review any planned finan-
cial transaction or arrangement that may have tax, accounting, or legal impli-
cations with their personal professional advisors.
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