Bank of America warns of a huge mistake investors could make this period

Making the right moves in the markets is not easy. Even more so when we are in such a turbulent environment. You don't want to make a rash decision, but you don't want to sleep on anything either. And that is what one of the biggest banks is now warning against.

Bank of America is warning of a mistake investors could now make

Everyone is now fearing a downturn after a successful January. Investors face a brutal downturn if economic growth stalls in the second half of the year, Bank of America $BAC-0.5% strategists say

"The worst thing is always to sleep through a downturn, the team led by Michael Hartnett wrote in a note. The risk is that inflation will flare up again in the next few months and that the U.S. economy will face a deeper recession in the second half of 2023 after remaining resilient in the first six months of the year, they said.

Global equity funds have seen $44.7 billion in inflows in the past four weeks, the note said, citing data from EPFR Global. Stocks have risen since the start of 2023 on signs of cooling inflation, optimism about China's economic reopening and hopes that a slowing economy will force global central banks to pause rate hikes.

Inflation is cooling. However, it is not certain that this is not just a false signal. Source

On Friday, data showed that U.S. employers created more jobs than expected in January, while the unemployment rate fell to a 53-year low, underscoring the resilience of the labor market despite the Federal Reserve' s most aggressive tightening in years.

The worst performance of the known 60/40 portfolio in 100 years. Source

But US stocks are still doing well. Surprisingly, though, Europe is outperforming them, which doesn't normally happen. It doesn't happen often, but European markets have the potential to make a mockery of the US this year. Will Europe be a better choice for investment this year?

Hartnett recommends investors start selling the S&P 500 when it gets above 4,200 points. He expects the benchmark to reach its first-quarter highs before February 14. The strategist has been justifiably bearish throughout the past year, although his prediction of a bottoming out in the first three months of 2023 has yet to materialize.

Hartnett's view is shared by several strategists. The well-known Michael Wilson of Morgan Stanley $MS-0.5% said investors flocking to the stock rally will be disappointed because they are in direct conflict with the Federal Reserve. Marko Kolanovic of JPMorgan $JPM-1.2%. said the economy is headed for a downturn at a time when stocks are rising, which he said will bring the center of two huge forces and it is unclear which will emerge as the winner.

What do you think? Is the biggest risk that investors will sleep through the downturn? Will stocks rise and we have already seen and seen the bottom?

Disclaimer: This is by no means an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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