BofA: “QE vs Unemployment” Means Soaring Inflation Will Crush The Dollar

Friday, April 3, 2020
By Paul Martin

by Tyler Durden
Fri, 04/03/2020

Here are the key takeaways from Michael Hartnett’s latest Flow Show:

Lows on corporate bonds & stocks to hold on extreme bearishness & policy stimulus.

Policy ended credit crunch but not yet recession…US dollar, oil, HY bonds will signals worst of recession priced-in.

Big EPS headwinds: bias asset allocation toward growth, yield, quality alongside stagflation hedges (gold & small cap).

And before we get into the meat of Hartnett’s latest weekly must read, a quick reminder that it’s one of those years where gold is the top performing assets: gold 3.6%, US dollar 3.4%, government bonds 3.0%, cash 0.5%, IG bonds -5.7%, HY bonds -14.9%, global equities -24.2%, commodities -41.6% YTD.

With that in mind, here are the key themes of the current week:

March capitulation: historic $284bn out of bonds and $658bn into cash in past 4 weeks ($64bn out of equities = sideshow).

Bond capitulation: record month of redemptions from IG bonds ($156bn), EM debt ($47bn), Municipal bonds ($24bn), HY bonds ($23bn).

Tech indestructible: $4bn inflows to technology funds in March & inflows throughout 2020 (Chart 3); IG bonds = “glue” holding Wall St together, but tech “glue” for stocks (Nasdaq currently defending v imp asset allocation resistance level vs. T-bills – Chart 2).

The Rest…HERE

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