BofA - Hartnett - The Flow Show Forever Blowing Bubbles_20240202

AccessibleversionTheFlowShowForeverBlowingBubblesScoresontheDoors:oil3.0%,commodities2.3%,USdollar1.7%,stocks1.3%,cash01February20240.4%,HYbonds0.2%,IGbonds-0.2%,gold-0.9%,govbonds-1.5%,crypto-2.6%YTD.InvestmentStrategyTaleoftheTape:USregionalbanks-9%in2daysbutunlikeQ1’23zeitgeistnowbankGlobaldeflationiscontagiouslyliquiditypositiveforriskassets(especiallyIG&monopolistictech…so2010s“QEbull”)untilbankdeflationcausesjumpincreditspreads(P&Gjustissued10-yearbondattightest37bpsspreadtoUSTofall-time)and/orjumpinunemployment(-vepayroll).ThePriceisRight:investormacroprobabilitiesroughly75%softlanding,20%nolanding,5%hardlanding;softlandingwinnershouldbebullinequity“breadth”,“bonds”=hardlandingwinner,yetpriceactionstillleaningtowardnolanding/bubble…Magnificent7=45%ofJanS&P500return(71%ex-Tesla)astheirmarketcap($12.5tn)risesabovecombinedGDPofNewYork,Tokyo,LA,London,Paris,Seoul,Chicago,SanFrancisco,Osaka,Dallas&Shanghai.TheBiggestPicture:"bondsmaster,stocksservant"…exceptinbubbles&deflation;MichaelHartnett"yieldsdown=Nasdaqup"bigtimeinQ4(Chart2),butscriptflippedto"Nasdaqup=InvestmentStrategistyieldsup"first4weeksof’24,price-actionwhichoccurseitherpost-recession(’09)orBofASbubbles(’99);investorspositioningforFedcuts/AI-manianoteoptimalstrategyis+16468551508“barbell”ofbubblestocks&verydistressedassets(wasEMi...