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Bank of America Strategists Bearish On Markets While Others Are Not

Wall Street's Banks bank of america strategists
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EDITOR'S NOTE: While most investment banks are still telling their investors that the stock market money train will never come to a halt, one bank is finally singing a different tune. According to Yahoo! Finance, Bank of America strategists sent a letter to investors discussing their fear about a bear market on the horizon. Yahoo! reports that “strategists led by Michael Hartnett listed macro trade recommendations, including long positions on volatility gauges, oil, energy, the U.S. dollar, and real assets. Investors can expect a ‘rates shock’ in 2022, following the “inflation shock” of 2021 and “growth shock” of 2020, they wrote.” That is a very different forecast than the ones from Goldman Sachs Group Inc. and JPMorgan Chase & Co., which are still saying that despite inflation, tapering, and incoming rate hikes, that the market will still be a bull in 2021. 

(Bloomberg) -- Bank of America Corp. strategists are bearish on markets next year and urged investors to focus on preserving cash as faster inflation and higher interest rates upend the trajectory of global asset prices.

In a note to clients, strategists led by Michael Hartnett listed macro trade recommendations, including long positions on volatility gauges, oil, energy, the U.S. dollar, and real assets. Investors can expect a “rates shock” in 2022, following the “inflation shock” of 2021 and “growth shock” of 2020, they wrote.

“We are therefore bearish and believe capital preservation will grow as a theme in the year ahead,” the bank strategists said.

Their forecast contrasts sharply with bullish views at other Wall Street banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., who see stock markets climbing at a more muted pace next year.

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Bank of America’s strategists cautioned that this is a “most unconventional of cycles” and its end is “highly unlikely to follow a conventional path.” They draw parallels between today’s investment backdrop and the “early stagflation” of the late 1960s and early 70s.

In the bull case for equities, asset prices could keep going higher if the Fed is determined to keep real rates deeply negative, they wrote.

The strategists also reiterated concerns about the risks building in frothy market corners. “The-mother-of-all bubbles in crypto & tech remains a ‘fat tail,’” they said.

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Originally posted on Yahoo Finance.

 

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