Even after a powerful rebound after the early-April tariff-driven selloff, Bank of America’s chief investment strategist Michael Harnett says the case for a lasting bull market still depends on a rare trio of conditions that remains out of reach for now.
In his regular “The Flow Show” report, titled “Stay BIG, sell rips” and shared Friday, the renowned contrarian strategist said he remains a buyer of dips in bonds, international stocks and gold — forming the acronym BIG — while selling into rallies in U.S. stocks and the dollar.
“If no recession, equity lows are in, simple; but can’t jump back on bull unless Treasury yields falling below 4%, and earnings growth stays above 5%” Hartnett said.
Are Stocks Still Oversold?
Despite the recent rebound, the SPDR S&P 500 ETF Trust (NYSE:SPY) remains 12% below its all-time highs reached in February.
Market internals tell a grimmer story: Harnett said that 304 stocks in the S&P 500 and 58 in the Nasdaq 100 are still trading below their 2021-22 highs.
This broad-based weakness highlights what Harnett described as a “remarkable flip from ‘U.S. exceptionalism’ hubris to ‘U.S. repudiation.’”
Technically, only one-third of stocks in the S&P 500 …