In recent weeks, as the market entered its latest irrational meltup phase where in addition to the ongoing AI pump, we have now also seen the latest coming of the retail meme stonk bid which sent GME and AMC soaring and the just as quickly, plunging (here is a remarkable stat from Goldman last Thursday: "45% of the total market volume so far today is in <$1 stocks. This compares to YTD average of ~12% for <$1 stocks. Clearly a knock-on effect associated w/ meme stock activity"), rational market commentators decided to take a step back and refusing to predict what happens next, are content with merely pointing out the absurd.
BofA's CIO Michael Hartnett isn't one of them, and while taking delight in pointing out the absurdities of the day-to-day market, in his latest weekly Flow Show note (available to pro subscribers in the usual place), Hartnett looks at the secular big picture before the four big main asset classes: stocks, bonds, commodities and anti-fiat (gold and crypto), and then summarizes what in his view is the obvious "pain trade" of the second half.
But before we get there, first some big picture observations on where we currently are, starting with the biggest picture of all, namely the total return of the 30Y Treasury which is a catastrophic 45% since April 2020: because when we said that they want to inflate the debt away, we were not kidding and that's precisely what they are doing.
