US shares can keep away from a dire outlook so long as bond yields keep beneath a historic excessive of 5%, based on Financial institution of America Corp. strategist Michael Hartnett.
The strategist — among the many extra bearish voices on Wall Road — mentioned the S&P 500 index can proceed to commerce above 4,200 factors within the close to time period in such a situation. A drop beneath that stage can be pushed by a stronger greenback, increased yields, oil rising above $100 a barrel and “clear indicators” {that a} credit score crunch for small companies was inflicting increased unemployment, Hartnett wrote in a notice dated Oct. 12.
The 4,200 mark can be near the benchmark index’s 200-day shifting common, thought of a key technical help stage that merchants use to evaluate whether or not the longer-term pattern is up or down. The S&P 500 dropped near it in early October as US bond yields surged to their highest in 16 years. The index has since rallied 2.8% as yields retreated, and is now monitoring its second weekly advance in a row.
For 2024, Hartnett mentioned the “finest bullish shout” was {that a} recession and price cuts by the Federal Reserve would drive good points in bonds and gold, in addition to a broader inventory market rally. The strategist has remained bearish for 2023 total even because the S&P 500 has surged 13%.
With cash market funds nonetheless seeing annualized inflows this yr at $1.4 trillion, buyers must see an financial contraction in addition to price cuts to “promote money” and “ignite new bulls,” the strategist mentioned.
This text was offered by Bloomberg Information.