This week’s Wall Street strategists wrap is, for the first time this year, wall-to-wall bearish. BofA is now in the bunker:
Pandemic: COVID-19 pandemic by the numbers…5.1 billion vaccinations, 214 million cases, 4.5 million deaths (Chart 3); the policy reaction…$32 trillion of monetary and fiscal stimulus; the Wall St reaction…global stock market capitalization up $57 trillion in 18 months; despite >5bn vaccines, societies & economies remain hostage to the pandemic, allowing Wall St to discount endless stimulus to the benefit of asset prices; the “end” of the pandemic will be very negative for Wall St, but few think it “ends” soon.
Pandemic & Wall St: the battle between lockdown & reopening battle has caused significant relative asset price movements; the performance of reopening vs lockdown baskets is highly correlated with bond yields (Chart 4) as well as the relative performance of HY bonds vs IG bonds, small cap stocks vs large cap, value vs growth and so on (see last week’s Flow Show); the Delta variant in the past two months has caused “lockdown” to outperform “reopening”.
The full text of this article is available to MacroBusiness subscribers
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
