Bank of America Corp.'s Michael Hartnett says investors will keep shunning riskier trades until the dollar's recent surge shows signs of peaking. In a note, the strategist also said market jitters are likely to persist until rising bond yields ease from their highest levels in more than two decades, and he recommends to "buy the humiliation" by starting to add some bonds to portfolios. The Bloomberg dollar index has risen 3% from a September low as investors rebuild cash cushions by exiting riskier assets, a move accompanied by rising bond yields driven by inflationary pressures from the Iran war, expectations of more monetary policy tightening ahead, and strong corporate earnings growth. Hartnett said recent price action suggests markets have been cutting leverage and reducing risk, but there is likely a floor in the form of more aggressive Treasury buybacks from the US administration, particularly if rising yields were to threaten the AI investment boom ahead of the US midterms in November. He added that downside risks would become more worrying if small and mid-cap stocks joined banks in their steep decline, which would signal that optimism about strong economic growth has peaked and ultimately weigh on technology stocks.
Bank of America CorpBofA strategist Hartnett's note recommends buying bonds and warns of continued risk-off until the dollar peaks; it is the firm's own research commentary, not a company-specific financial event.
