We are selling risk rallies - Bank of America's Hartnett

December 2, 2022 8:44 AM EST
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Michael Hartnett, Chief Investment Strategist at Bank of America, has reiterated his bearish position and the view that equities have some unfinished business at levels much lower than here.

The “inflation shock” is over, claims Hartnett, “rates shock” is close to done but “rates shock & recession shock for Main St just beginning,” he wrote in his regular weekly note to clients.

Hartnett also urged the firm’s clients to sell risk rallies as the market is “too aggressively front-running a negative “the pivot is here” payroll.” His note was released before today’s earnings report, which came in hotter-than-expected, therefore facilitating a pullback in stocks.

“Big losses of ’22 followed by small gains in ’23; job losses in ’23 likely to be as shocking as inflation ‘in 22…we say bonds>stocks in H1, probably commodities too for a while given history.”

“Bears (like us) worry unemployment in ’23 will be as shocking to Main St consumer sentiment as inflation in ’22, especially consumers with a 2% savings ratio,” he added.

Hartnett also highlighted key flows in the week to Wednesday, including the largest passive equity outflow since June and the largest inflow to utilities since January 2022.

By Senad Karaahmetovic

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