By Senad Karaahmetovic
Michael Hartnett, Chief Investment Strategist of Bank of America, expects the ultimate low in stocks for this downturn to come from March to May next year. The peak in CPI, Fed hawkishness, yields, and the U.S. dollar should come not before the spring of next year, which will set the basis for a major rally.
Hartnett, one of the most vocal bears on the Street, addressed the Fed pivot hopes by noting it’s easy to pivot when unemployment is 8% and inflation 3%.
“[It’s] much harder to pivot when inflation 8% & unemployment 3%,” Hartnett wrote in a regular client note today.
The strategist reminded clients that the Fed hiked by 75bps four times since June, not four times in 2022. He also said that Street’s “relative pivot from secular stagnation to secular stagflation [is] well underway.” In this context, Hartnett sees Big Tech underperforming, relative to the small cap value.
In terms of the weekly flows, as much as $62.1 billion were inflows to cash, marking the biggest quarterly inflow since Q1 2020. Moreover, $1 billion were outflows from gold to extend the longest streak of outflows in 8 years.
Finally, the Bank of America Bull & Bear Indicator stands at “0” for the 7th straight week, which is the longest period of maximum bearishness since Jul 2008 and the Lehman event.