Why Bank Of America Expects Stocks To Hit “Big Lows” In The Next Few Months

Monday, November 19, 2018
By Paul Martin

by Tyler Durden
Mon, 11/19/2018

Late in January, just as the market was enjoying an unprecedented melt-up ahead of the February VIXplosion which sent the S&P on its first of two corrections in 2018, Bank of America published a warning report, titled “Our Sell Signal Was Triggered On Jan 30, S&P 2686 Is Next” in which chief investment strategist Michael Hartnett explained why he was convinced that a drop as much as 12% was imminent in the coming weeks. He was spot on, with the S&P tumbling within days, hitting hit target and then some.

Fast forward to this weekend, when Hartnett published his preview of the year ahead, title “The Big Low”, in which the strategist not only does a full post-mortem of 2018, but more importantly lays out his preferred trades for 2019, which he views as a year of two halves: a poor first half, during which stocks will “find their low once rate expectations peak and EPS expectations trough”, a move he calls “The Big Low” which will then be followed by a V-shaped recovery for credit and equity prices into the second half of 2019, or as he puts it:

We are bearish stocks, bearish bonds, bullish commodities, bullish cash and bearish the US dollar; we expect to turn tactically risk-on in late-spring but start 2019 with bearish asset allocation of 50% equities, 25% bonds and 25% cash; coming years nonetheless less asset-friendly than past decade.

The Rest…HERE

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