After his credibility was shaken by badly underestimating the severity of the impact of Liberation Day, BofA's CIO Michael Hartnett stuck his neck out and in the days immediately following April 2, issued the following market matrix reaction function which has largely been borne out from a threshold standpoint.
- SPX 5400: nibble at weak dollar plays (EM) &“rate sensitives” (REITs);
- SPX 5100-5200: buy “policy pivot” plays (Fed cut/US tax cut/EU & Asia easing plays, e.g. US small cap/retail/homebuilders, EU cyclicals, Asia tech);
- if recession, wait for SPX 4800-5000 to splurge all-in on risk once “Trump put” triggered by low 40-45 approval rating & higher unemployment (claims 300k).
Three weeks later, in his latest Flow Show Note (available to pro subs). the BofA Chief Investment Officer tells clients and readers to stay long BIG (his favorite trade idea for 2025, namely Bonds, International Stocks, and Gold), while selling rips in the S&P, and sumarizes the latest tale of the tape as follows: the 3Bs of Bonds (fastest 50bps Treasury yield jump since May'09), Base (Trump approval drop from 53% to 46%), Billionaires (>$5tn Magnificent 7 market cap loss) spurred the Trump/Powell, Bessent/China, Musk/DOGE “blinks” & risk rally; however, it is now up to the 3Cs of China peace, Fed Cuts, resilient Consumer to debunk the “sell-rip” mantra... and for now these three are missing.
