In an industry so attuned to costs as investment banking, it's a wonder that so many analysts are still engaged in the largely thankless task of generating a few thousand words a week for clients who pay them about as much attention as a fart in the wind. Of the 40,000 or so research reports cranked out each week by the 15 biggest banks, just 1 percent ever hit investors' retinas.
To be noticed, then, requires as much flashy attention-grabbing as an analyst can get away with while still exuding the sobriety and calm expected from a major financial institution. To wit, see Bank of America Merrill Lynch's characteristically subtle “Flow Show” noteFriday, which points to the 100 bps move in 10-year Treasuries and global equities' $10 trillion market cap rise over the last 12 months before concluding that markets are basically a giant egg-shaped man poised to fall down and shatter into a million pieces. From the note:
Next 6 months higher interest rates likely much more negative for stocks & credit given new central bank policies; tightening by the Fed , rhetorical tightening by ECB has already succeeded in raising bond yields, volatility, reducing tech stocks; summer 2017 = massive inflection point in central bank liquidity trade…will likely lead to "Humpty-Dumpty" big fall in market in autumn, in our view.
Before assuming that BAML's analysts binged over Independence Day weekend and showed up Thursday too pickled to rise above the sophistication of a nursery rhyme for their latest offering, note that the Humpty-Dumpty theme is one BAML has been developing for several months. Here's a June note commenting on the growing hawkishness of central bankers:
Humpty-Dumpty: won't spark immediate bear market...EPS, inflation, cash, credit positives remain; but this inflection point in monetary policy will become negative in coming quarters; Icarus trade likely followed by Humpty-Dumpty (a "big top" or big flash crash) later in year...finally volatility is a buy.
Needless to say, the message here should be of deep concern to the habitually bullish among us. But if you're going to deliver hard news, might as well do so in reference to a charmingly anthropomorphized egg whose catastrophic and irreversible undoing upends a kingdom.