By Senad Karaahmetovic
Chief Investment Strategists at Bank of America have reiterated their bearish position and the view that equities have some unfinished business at levels much lower than here.
The "inflation shock" is over, claims the strategists, "rates shock" is close to done but "rates shock & recession shock for Main St just beginning," they wrote in their regular weekly note to clients.
They 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." Their 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," they added.
The strategists 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.