Bank of America: The market has not yet broken through key levels, investors still prefer stocks
The turmoil in the global financial markets has not reached a level that worries about an economic hard landing, and investors still prefer stocks. Despite a drop of about 6% in the S&P 500 Index, it still remains above the 200-day moving average. Strategists at Bank of America in the United States stated that investors' preference for stocks has not ended due to the market's sharp decline. Investors should pay attention to the 200-day moving average of the Philadelphia Semiconductor Index and exchange-traded funds of large technology stocks. It is expected that the stock market may slide again by 10%, and investors should sell stocks when the Federal Reserve cuts interest rates for the first time. In addition, government bonds, real estate investment trusts, small-cap stocks, and emerging markets such as Brazil are investment opportunities
Zhitong Finance APP learned that Michael Hartnett, a strategist at Bank of America, stated that the turbulence in the global financial markets has not reached a level that would cause concerns about an economic hard landing. Data shows that although the S&P 500 index has dropped by about 6% from its historical high in mid-July, the index is still above the 200-day moving average of around 5050 points, and the yield on the 30-year U.S. Treasury bond has not fallen below 4%.
Michael Hartnett said, "The technical level that would prompt Wall Street to shift expectations from a soft landing to a hard landing has not been breached yet." "Investor feedback is 'restless,' but expectations of a Fed rate cut imply that investor preference for stocks (rather than bonds) has not ended despite the market turmoil."
In the past month, global markets have been turbulent as investors worry that the Fed's rate cuts are too slow to prevent an economic recession in time. However, the S&P 500 index rebounded after Thursday's initial jobless claims came in lower than expected, with the index only down 0.5% so far this week.
Michael Hartnett mentioned that the next technical level to watch would be the 200-day moving average of the Philadelphia Semiconductor Index and exchange-traded funds (ETFs) tracking large tech stocks. He has a more neutral stance on the stock market this year, having been bearish on the market during the stock market rebound in 2023.
If the S&P 500 index falls again, Michael Hartnett suggested that it may test the high point of 2021, indicating a potential further decline of 10%. He reiterated his view that investors should sell stocks when the Fed cuts rates for the first time. He expects winners in the artificial intelligence industry to "sink" in the second half of the year until profitability improves.
He also emphasized investment opportunities in certain assets, including government bonds, real estate investment trusts, small-cap stocks, and some troubled emerging markets like Brazil, which have been "strangled by a 5% yield, but will perform better when yields are in the 3%-4% range."