The Three Reasons Why Bank Of America Just Said To Go Long “Cash & Volatility”

Thursday, January 7, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
01/07/2016

JPM, Citi, UBS, and now one of the Wall Street strategists whose perspective we respect the most, BofA’s Michael Harnett, who quite clearly disagrees with the official BofA “straight to CNBC” mouthpiece Savita Subramanian, is out with a note in which he is telling reders to get out of stocks, go into cash expecting a short sharp pullbacks in risk assets (e.g. SPX to 1850-1900), and be long volatility.

From his report:

Investors should be long cash & volatility, and be prepared for a short sharp pullback in risk assets (e.g. SPX to 1850-1900), at least until one of the following conditions is met:

PMI’s back over 50 in China & US
2-way risk emerges in CNY & oil inducing value buyers of HY & EM debt
A spike in volatility and/or an asset price reset induces Fed to pause

Why the unexpectedly bearish stance? According to Hartnett, “cash is king” and defensives are to be bid because of the 3Ps: Positioning, Profits and Policy.

This is what he thinks:

3P’s say Cash is King

Ever since the end of QE3 in late-2014, leadership across asset markets has shifted sharply away from stocks & bonds, to the US dollar, volatility & cash. In 2015, cash outperformed both stocks (down 2%) & fixed income (down 3%), for the first time since 199 (Table 1).

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter