BofA Is Bearish on Stocks, Sees 'Mother of All Bubbles' in Tech
Comment of the Day

November 22 2021

Commentary by Eoin Treacy

BofA Is Bearish on Stocks, Sees 'Mother of All Bubbles' in Tech

This article by Nikos Chrysoloras for Bloomberg may be of interest. Here is a section:

Rates shock” in 2022 to follow “inflation shock” of 2021 and “growth shock” of 2020

Financial conditions set to tighten, short rates to rise, QE to end, inverted yield curve a threat, and EPS growth to slow sharply; GDP growth to remain robust with China as outlier

Base case for strategists is low or negative and volatile asset returns in 2022, after “18 months of fat (latterly frothy) returns in crypto, credit and U.S. equities”
2021-2022 investment backdrop is similar to early stagflation of late-60s

Stock market upside could continue if it becomes clear in 1H that Fed is determined to keep real rates deeply negative, “the-mother-of-all bubbles in crypto & tech remains a fat tail”

Biggest downside risk is Fed staying hawkish even if Wall Street corrects, because fears of wage-price spiral grow; more extreme downside risks include a crypto-derivatives crash, geopolitical events related to China and Taiwan, and that a receding liquidity wave exposes credit-events to the detriment of a private or public equity

Eoin Treacy's view

I have seen a noticeable uptick in talk of a crash over the last couple of weeks. It might be early to think about this is as a consensus view, but it certainly suggests some investors are wary of chasing successive new highs in steep uptrends.

Click HERE to subscribe to Fuller Treacy Money Back to top