Next Market Leg Up?

From Business Insider.com:  {Excerpt with my highlights}

"BofA Merrill Lynch head of U.S equity strategy Savita Subramanian is telling clients to get ready for "the next leg of the Great Rotation" — the seismic shift out of bonds and into equities envisioned by the bank's analysts........

'So far the rotation from bonds into equities has primarily been into bond proxies,' she writes in a note. 'Given the supply/demand imbalance for yield, we expect equity income inflows to continue. Demographics argue for continued demand, while supply is likely to stay tight as both interest rates and the S&P 500 payout ratio are trending well below average. And equity income remains compelling, with one in five S&P companies offering a dividend yield higher than that of the [10-year U.S. Treasury note].'.......

.....So, what comes next?

Subramanian writes:

Expect continued inflows into taper-proof yield

"With stretched valuations and interest rate risk looming for high-yield, ex_growth stocks,  the positioning shift we have observed since May is likely to continue as the growing pool of income equity seeks out cheaper, less rate-sensitive stocks that will still meet yield targets. Stocks that offer above-market yields but participate in a cyclical recovery may be most attractive to investors who now have lost money in both bonds and bond-like stocks. These half growth/half yield stocks—which generally offer lower payout ratios  and higher cash levels—are better positioned to grow their dividends over time, with strong representation from our O/W sectors of Tech, Energy and Industrials."....

Link:  http://www.businessinsider.com: Next Leg of the Great Rotation is Coming.