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Bank of America’s top strategist continues to see the ongoing bounce in the S&P 500 as a relief rally that will end likely around 4200.
His bear case scenario is a rotation around these levels to print “true lows”, which are likely below 3600.
“’Inflation shock’…check, ‘rates shock’…check, ‘recession shock’… check, and 24 hours after abandoning ‘forward guidance’/embracing ‘data dependence’ US enters ‘technical recession’; since catalyst for bear market was repricing of interest rates (took SPX from 4800 to 3800), yields now falling & equities rallying makes sense,” the strategist said in a client note.
He noted that biotech, China tech, and Bitcoin have all soared in recent weeks, but we are yet to witness a peak in yields.
The strategist believes it is “too early to reposition for Fed pivot bull trade”.
As far as flows are concerned, he said investors poured $27 billion into cash in a week to Wednesday, July 27. Moreover, $5.6 billion went to equities, which is the first inflow in 6 weeks.
Finally, the strategist sees the optimism that “Fed done by Thanksgiving = lows are in” as “premature”.
