Written by Sinad Karahimetovic
Forget about inflation dropping below 4%-5% anytime soon as the inflation shock is “not over,” warns Michael Hartnett, senior investment analyst at Bank of America.
In response, both Fed funds and US yields are likely to head to 4%-5% in the next 4-5 months, which should translate into new lows in equities.
Hartnett also reminds bank clients that the S&P 500 has been in the 20th bear market in the past 140 years with an average peak-to-bottom decline of 37.3% over 289 days.
“History is not a guide to the future but history says that the bear market ends on October 19, 2022 (the 35th anniversary of Black Monday) with the S&P 500 at 3020 (note that the Nasdaq is already down 29%),” Hartnett added.
The next downside move could start with the EPS recession shock with the pull of guidance from FedEx (NYSE: 🙂 yesterday that asks serious questions about the state of the economy.
About where to buy, Hartnett says: “nibble at SPX 3600, bite at 3300, gorge at 3000.”
As far as inflows are concerned in the week to Wednesday, outflows on stocks were $6.2 billion, while gold, bonds and cash saw outflows.