Fade S&P 500 Above 4200 as the End Game is Below 3600 – BofA Strategist

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© Reuters. Fade S&P 500 Above 4200 as the End Game is Below 3600 – BofA’s Hartnett

By Senad Karaahmetovic

Bank of America’s Chief Investment Strategist has once again reiterated his stance that the ultimate low in the is yet to be seen.

Despite the benchmark index trading near 4200, which has been seen as a key bull/bear line in the near-term, the strategist told clients to fade the S&P 500 above this level.

“Still think end-game 3600>SPX; next big short (up in yields, down in tech) once stagflation returns Q4/Q1,” he said in his weekly note to clients.

On what investors can expect in the coming weeks, he added:

“Sentiment still bearish (though shorts have covered) + no FOMC ‘til Sept 21st…rip lower next 4-weeks requires “v hot” data (e.g. July payroll >400k, U-rate drops to 3.7%) mean recession risk-off as stocks (esp tech) “catch-down” to inverted yield curve.”

Thus, the focus remains on inflation with BofA economists seeing both core CPI & PCE at around 5% YoY in Q1’23.

“For headline CPI to fall back below 5% in Q1’23 requires monthly print to drop from 0.9% to 0.1-0.2%,” the strategist further added.

As far as weekly flows are concerned, the week to Wednesday saw an $11.7 billion inflow to bonds while outflows from stocks and cash were $2.6 billion and $4.1 billion, respectively.

In the meantime, Bank of America’s Bull & Bear Indicator remains at 0, signaling extreme bearishness.