Saturday, November 11, 2023
HomeFinancial AdvisorBofA's Hartnett Says Markets Outlook Flips To Greed From Caution

BofA’s Hartnett Says Markets Outlook Flips To Greed From Caution

The caution that pervaded stock markets in the past three months has now switched to “year-end greed” on expectations of a decline in US bond yields, according to Bank of America Corp.’s Michael Hartnett.

The “fear” among investors last month about a surge in Treasury supply as well as the worries around fiscal deficit had caused yields to “overshoot,” Hartnett wrote in a note. That has now flipped as the 10-year yield is seen closer to 4.5% rather than 5.5%, the strategist said.

That optimism has been reflected in fund flows, with global stocks recording inflows of $8.8 billion in the week through Nov. 8, according to the note citing EPFR Global data. Still, cash remains the asset class of choice, Hartnett said. About $77.7 billion went into money market funds in the week, setting them up for record annual inflows of $1.4 trillion.

Hartnett has remained broadly bearish on US stocks this year, a view that played out over the summer as the S&P 500 dropped 10% from a July peak. He struck a rare bullish tone last week when he said technicals no longer stood in the way of a year-end rally.

After gaining for eight straight sessions since the end of October, the S&P 500 dropped on Thursday as hawkish comments from Federal Reserve Chair Jerome Powell reignited worries about higher-for-longer interest rates. The 30-year Treasury yield spiked by as much as 22 basis points and two-year rates topped 5%.

Other Wall Street strategists have warned stocks still face risks over the next two months. Morgan Stanley’s Michael Wilson — among the biggest bearish voices on US stocks — said this week the recent gains were part of a bear market rally. Meanwhile, data from Citigroup Inc. showed the odds of a positioning-led rally were lower after short covering last week.

This article was provided by Bloomberg News.



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