It must be officially summer because Michael Hartnett's Flow Show notes are getting shorter.
Indeed, one week after laconically discussing the "magnificence" of inflation, in the BofA CIO's latest note he goes back to three of his core themes (because it truly was a slow week), and focuses on i) the upcoming reversal of the "Anything But Bonds" trade, ii) the historic collapse in market breadth, although in the context of "one pain trade after another" it is time for value to outperform growth and for breadth to win as economic growth slows, and iii) the financial disintegration of Japan.
Starting at the top, Hartnett writes that the latest Tale of the tape is once again all about bonds, namely "political polarization, protectionism, war, inflation, supply (even Saudi Arabia on course for record bond issuance in ’24) means secular ”buyers’ strike” in global government bonds is valid... but cyclical always able to trump secular" and so Hartnett says that the 3Ps of Positioning, Profits, Policy means a second half reversal of the infamous “ABB” Anything But Bonds trade; Hartnett's advice: buy-any-dip in bond prices, while for credit & stocks “sell the first cut” is still the call.
