Summary
- Two important changes in the operating environment for Bank of America have complicated this stock’s story.
- Economic uncertainty and my concern about a near-term economic disturbance have replaced a previously strong and clear economic growth outlook.
- A shift in Federal Reserve monetary policy to a neutral position from previously hawkish, along with a nearly inverted yield curve, are negative factors for BAC.
- I am downgrading my opinion on the shares to “Neutral” from “Strong Buy” because of these important changes.
- I anticipate increased volatility and downside risk near-term, but I also see the economic backdrop for the shares improving later this year.
Investment Thesis for BAC
Something significant has changed for Bank of America (BAC) shares, complicating the picture today for what was a simple long call not long ago. With increased uncertainty about the economy and Fed monetary policy, volatility will be more prevalent for the shares moving forward. So it is no longer among my highest conviction calls. Thus, I am downgrading my view on the shares to “Neutral” from “Strong Buy”.
