The Tell: BofA is selling U.S. equities rally on worries that unemployment will be ‘shocking’ in 2023

by | Dec 2, 2022 | Stock Market

Strategists at BofA Global Research said it is time to sell the U.S. stock market rally ahead of a potential surge in the unemployment rate next year.  “Bears (like us) worry unemployment in 2023 will be as shocking to Main Street’s consumer sentiment as inflation in 2022,” strategists led by Michael Hartnett, chief global equity strategist at BofA Global, wrote in a weekly note. “We (are) selling risk rallies from here as the markets (are) too aggressively front-running a negative ‘the pivot is here’ payroll.”

The U.S. created a robust 263,000 new jobs in November, a historically strong pace of hiring which threatens to prolong a bout of high U.S. inflation, raising concerns that the Federal Reserve’s policy will remain tighter for longer. The unemployment rate held at 3.7%, while the average hourly earnings rose twice as much as the Wall Street’s forecast.  However, the BofA’s Bull & Bear Indicator jumped to 2.0 from 1.4 in the week through Nov. 30, which indicates a “buy signal” for risk assets is close to an end, according to analysts. “The indicator stood at the highest since May 2022 on more bullish bond inflows, credit technicals, equity breadth, (and) hedge fund positioning.”  That sentiment was echoed by other Wall Street banks. JP Morgan Chase & Co.’s Marko Kolanovic, once one of Wall Street’s most vocal bulls, called for equity prices to stumble early next year, and argued the rebound in stocks was overdone after October, as the Federal Reserve’s interest-rate rises batter the U.S. economy. Morgan Stanley’s Michael Wilson, one of the most vocal bears …

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