Bank of America told investors on Friday to get out of the stock market and dump the US dollar while they still can.
The warning, issued in a note led by strategist Michael Hartnett, said the recent rally means nothing without real progress on three major issues: interest rate cuts from the Federal Reserve, a trade deal between the US and China, and strong consumer spending. None of that is happening right now.
BoFA’s report said the rise in both stocks and the dollar is being driven by a narrow group of tech names—what Hartnett called a “Magnificent 7-led squeeze.” But this setup won’t last.
Michael warned that any chance of a real breakout for the S&P 500, which he pegged at 5,690 as a key level, depends entirely on the US fixing those three problems. Until then, BoFA is telling investors to sell every rally and get out of US assets.
BoFA warns dollar and stock market strength won’t hold
Hartnett and his team said the dollar is still stuck in a long-term fall, and the global move away from US assets isn’t even close to finished. He said the only way that changes is if the Fed slashes rates, but there’s no sign of that happening.
The bank also made it clear that the current US trade policy is fueling global uncertainty and inflation. The aggressive tariffs from the White House are pushing money away from American assets and toward emerging markets, commodities, and foreign stocks.
BofA said US valuations hit extreme levels earlier in 2024, and that forced big investors to pull money out. The fallout has been brutal. The S&P 500 dropped as much as 19% from its February high before dip buyers stepped in and recaptured about half of the losses.
Meanwhile, the Bloomberg dollar index has lost 6.3% this year, adding more weight to Michael’s argument that the selloff isn’t over yet.
Michael said the weakening dollar is the most obvious investment theme right now. He said, “Weaker US dollar will play out either slowly with lower yields or quickly with higher yields.” He said the only thing that’s shown how serious this is, is the gold price, which he said is “brutally” exposing how fragile the dollar is.
Indexes post green week as Trump stokes more tariff drama
Despite all the warnings, the US market still posted a rare winning streak this week. On Friday, the S&P 500 stayed mostly flat after a solid three-day rally. The Dow Jones Industrial Average dropped 219 points, or 0.6%, while the Nasdaq Composite gained 0.4%.
The moves followed earnings reports from some of the biggest names in tech. Alphabet, one of the “Magnificent Seven,” jumped 3% after beating Wall Street on both revenue and earnings. Intel, on the other hand, tanked 7% after it gave a weak forecast and said it would start slashing both operational and capital spending.
But the optimism took a hit after a Time magazine interview with Trump went public. The president said he would count it as a “total victory” if the US managed to get tariffs between 20% and 50% on foreign imports a year from now. He also pushed back against the idea that rising bond yields forced him to pause tariff hikes, calling that assumption false. “The bond market was getting the yips, but I wasn’t,” Trump said.
Trump also said more trade deals would be announced in the “next three to four weeks.” But the drama with China is far from resolved. After the White House signaled it might soften its stance, Beijing quickly fired back.
China’s foreign ministry said there were no talks happening, no meetings planned, and no communication underway with the US on tariffs. They told the White House to stop “spreading lies” about the state of negotiations. Yes, they used those exact words, as Cryptopolitan reported, and guess what? The market did not react!
That comment came after Trump had said on Tuesday that current tariff rates on Chinese goods, which stand at 145%, could “come down substantially,” but wouldn’t be eliminated. Despite the lack of progress, US markets kept rising this week. The S&P 500 is up 3.8%, the Nasdaq climbed 5.4%, and the Dow added 2%.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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