“We are bearish”

Sunday 6 February 2022

BofA’s Michael Hartnett via ZH:

…is out with a rehash of the three reasons why, as he puts it, “we are bearish” and these are: after the “inflation shock” of H2’21, we are currently going through the “rates shock” of H1’22, which will mutate into the “growth shock” of H2’22 (i.e., recession) and be marked by negative returns in credit & stocks (Hartnett believes that the “Fed put” is at SPX 3800-4000, and IG spreads >150bps). This means that starting in Q2, the bull market in cash, volatility, commodities and EMs is set to end, and will be replaced by a “bear market” where the key trades are stocks, credit, Treasuries; he also reminds clients that key risks for a bear market being “systemic event” & recession, while bull risks are “Great Consolidation” & disinflation.

As Hartnett traditionally does, he takes a detour to remind readers of The Biggest Picture, which is as follows:

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About the author

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.