Bank of America doesn’t believe the Federal Reserve’s aggressive rate hikes will do much to curb inflation.
Over the past several months, the Federal Reserve has raised rates by 75 basis points for four consecutive times. Despite this aggressive stance by the FED, Bank of America thinks inflation is here to stay.
“Historically, it takes an average of 10 years for a developed economy to return to 2% inflation [once] the 5% threshold is breached,” the bank says in a recent statement.
The bank explains that wage inflation, a growing older population and the lack of investment in energy are all reasons why inflation may stay elevated. Bank of America also warned that oil prices will average $100 a barrel this year.
Unfortunately if Bank of America is right, stocks will continue sliding however energy stocks may see better days in the future.
One stock to keep an eye on, as explained by BofA, is Exxon Mobil (XOM).
Exxon Mobile has over $400 billion in market cap and continues to be an industry leader.
As the general market continues to bleed, Exxon’s shares have climbed nearly 60% in just the last 12 months.
Exxon’s profits for the first nine months of 2022 were $43 billion, a significant increase from the $14.2 billion in the previous year. The company also saw a rise in free cash flow, reaching $49.8 billion compared to $22.9 billion in the same period the previous year.
Due to these strong financials, Exxon is able to provide returns to investors through quarterly dividends of 91 cents per share, equating to a 3.3% annual yield. Bank of America has a positive outlook on Exxon and predicts a potential 26% increase in stock value with a price target of $136, as shares are currently trading at around $108.