Market Extra: The ‘crashy vibes of March’ could be prelude to a hard landing, warns Bank of America strategist

by | Mar 10, 2023 | Stock Market

Those “crashy vibes of March” are calling, and they could get a lot worse. That’s the warning from Bank of America strategists led by Michael Hartnett, who said that 290 global rate hikes over the past year, are not setting investors up for a Goldlicks global economy — not too hot or too cold. But rather, it’s the “prelude to a hard landing and credit events,” the team told clients in note on Friday.

Here’s their chart where Hartnett repeated the assessment that Fed policy tightening “always breaks something.”

That’s as the stock market also deals with fresh stress across the banking sector as shares of Silicon Valley Bank parent SVB Financial Group
continued to slump Friday amid fears of a run on the bank, weighing on the sector. But there’s lots more trouble under the hood of Wall Street, warned Bank of America. They noted the potential for a credit event in “tech & healthcare, [private equity/venture capital] lending, government debt, shadow banking/private equity, crypto, speculative tech, collateralized loan obligations and mortgage backed securities, and real estate, as evidenced by the below chart of slumping commercial mortgage-backed securities exchange traded fund

There are “so many potential catalysts for [a] systemic deleveraging event that sparks policy panic/end of Fed tightening; truth is source of event irrelevant…simply that it will happen and will cause policy makers panic (BoE restarted QE last Oct) and investors must be ready at that moment to deploy cash in new leadership assets which outperform in [an] era of higher inflation,” said Hartnett and the team. Even with panicky vibes, the S&P 500
is up 2% this year.

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