A $2 trillion investment chief at Bank of America pinpoints where investors should look for signs this cycle is about to end


chris hyzy

The most likely policy error that would trigger the end of this expansion stems from European credit, according to Chris Hyzy, the chief investment officer of Bank of America Global Wealth and Investment Management.
Since mid-2016, the European Central Bank has bought a monthly average of over $8 billion in investment-grade bonds as part of its quantitative-easing program.
“It’s more important to look at the European credit markets versus the US credit markets for any sign of a policy error coming,” Hyzy told Business Insider in a recent interview.

Nine years after the financial crisis, investors everywhere are wondering what will trigger the end of the subsequent expansion.

Chris Hyzy, the chief investment officer of Bank of America Global Wealth and Investment Management, is eyeing European credit. And no, he’s not referring to another Greek crisis.

“It can continue until there’s an error, and the biggest error that we see would be European credit stress,” Hyzy, who oversees about $2 trillion in assets, told Business Insider in a recent interview.

The European Central Bank, like the Federal Reserve, stepped in after the financial crisis to lower borrowing costs by buying government bonds. But in an unexpected twist, the ECB announced in March 2016 that it would add corporate debt to its $3 trillion (€2.5 trillion) quantitative-easing program.

This could be the complicating factor, according to Hyzy. That’s because the ECB’s buying of corporate bonds was an investment not only in the companies but in the spread, or gap, between the yields on corporate and sovereign bonds. Selling these bonds would lower their prices, which move inversely to yields.

“If they had to sell corporate bonds, that would widen out the spreads, that would raise input costs for companies, and that would be a policy error ultimately exported to the rest of the world in some fashion,” …read more

Source:: Business Insider

      

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