BofA Touts Hedges as Emerging Markets Shrug Off Middle East Risks
Currency bets across Europe, Middle East and Africa offer the best hedges against a rebound in the US dollar as investors grow complacent about risks from escalating geopolitical tensions, Bank of America Corp. says.
'We are concerned that markets underestimate the risks from the Iran situation,' David Hauner, head of global emerging markets fixed-income strategy, wrote in a note. 'If energy prices spike materially, the crowded USD short position is likely to be vulnerable, and with it positioning across EM.'
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Bank of America (BAC) is scheduled to report its Q2 2025 earnings on July 16, with analysts forecasting $0.90 per share, reflecting modest 8% year-over-year growth. I believe BAC is well-positioned to beat expectations, supported by conservative loan loss provisioning, ongoing share buybacks, strength in its Global Markets division, and higher net interest income amid slower-than-expected Federal Reserve rate cuts. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter BAC stock currently trades at $45, within striking distance of its all-time high of $47 per share. With resistance clearly set, BAC stock will need a strong catalyst to make further headway beyond $50 per share. Given the lack of clear catalysts, I remain Neutral on BAC stock. It currently trades at 1.66x tangible book value and 12.6x 2025 earnings—a valuation that's lower than peers like JPMorgan Chase (JPM), but still richer than that of many U.S. regional banks. Heading into Q2 2025, Bank of America's provisioning appears notably conservative. The bank's macroeconomic outlook assumes an unemployment rate of just below 5% by the end of 2025, remaining at that level through 2026, which is slightly more pessimistic than the Federal Reserve's projection of 4.5% for both years. Similarly, Bank of America forecasts 1% GDP growth in Q4 2025, undercutting the Fed's more optimistic estimate of 1.4%. In short, Bank of America's current reserves already reflect a cautious economic view, making it unlikely to build a significant provision in Q2 2025. The bank appears to have already accounted for a moderate economic slowdown later this year and into 2026. Analysts expect Bank of America to deliver earnings of $0.90/share in Q2 2025, up 8% year-over-year. 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This cautious stance is also supported by Berkshire Hathaway's ongoing reduction in its BAC stake, despite the stock remaining the firm's fourth-largest holding, which comprises 10.19% of Buffett's portfolio. The limited upside potential suggests it's wise to stay neutral for now. Turning to Wall Street, Bank of America earns a Strong Buy consensus rating based on 18 Buy and 2 Hold ratings over the past three months. Notably, not a single analyst is bearish on Bank of America. The average BAC stock price target is $49.38, implying a 9% potential upside. Bank of America's macroeconomic outlook remains more conservative than the Federal Reserve's, which suggests its earnings are better insulated in the event of a slowdown in U.S. economic activity later in 2025 and into 2026. I expect BAC to slightly beat Q2 2025 earnings estimates, supported by stronger net interest income, continued share repurchases, and a modest profitability boost from the Global Markets division. 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