Bank of America says the lows for stock prices and corporate bonds are in

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

While the direction of the market still hinges on when the coronavirus outbreak is slowed, some signs are emerging that the bulk of the selling in stock and corporate bonds is behind us, according to Bank of America’s Chief Investment Strategist Michael Hartnett.

First is the sheer magnitude of the pullback. More than $20 trillion in U.S. stocks value was wiped out during the pandemic-induced sell-off, and investment-grade credit spreads have widened to 400 basis points from 100 basis points, Hartnett said.

“Tough for asset prices & volatility to subside until human beings can safely leave their homes; that said … lows on corporate bond & stock prices are in,” wrote Hartnett, whose straightforward and data-filled notes are popular on Wall Street.

Secondly, a powerful contrarian “buy” signal for the market has been triggered. Bank of America’s proprietary “Bull & Bear” indicator, which looks at recommended positioning of Wall Street, points to “extreme bear.”

The past four weeks have seen a record $284 billion outflows from bonds and $658 billion in to cash, Hartnett added.

The indicator shows investors’ recent exit from stocks and corporate bonds is overdone, Hartnett said, adding the extreme bearishness always leads to big bounces.

20200402 SP500 looking for a bottom

The strategist also predicted that “peak negativity” for the coronavirus will be upon us in April. As of Friday, confirmed cases of coronavirus have reached one million globally.

Hartnett added the oil price war that roiled the markets earlier may be coming to an end. Oil posted their best week on record after President Donald Trump told CNBC that he expected Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman to announce a deal to cut oil production by 10 million to 15 million barrels.

Still, Bank of America as a firm doesn’t see a big rebound. The bank cut its year-end target on the S&P 500 to 2,600 from 3,100, which would translate into a nearly 20% loss for the full-year 2020 and is only about 4.5% higher from current levels. The new outlook represents the most bearish view on Wall Street, according to the CNBC Market Strategist Survey that rounds up 16 top strategists’ forecasts.

The outlook reflects the bank’s U.S. GDP forecast of a 7.7% drop this year, which would mark the worst post-war recession in history. The firm also expects the S&P 500 earnings per share to tumble 29% this year as the pandemic wreaks havoc on corporate profits.

Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

How to Create Professional Business Cards With Custom Business Card Stock and Safe Zone Features

Business cards are small cards carrying business details about an individual or a business. They are usually shared during formal introductions as both a...

Social Security recipients with kids won’t want to miss this stimulus-check deadline

Social Security recipients who have children but haven’t filed taxes recently need to submit their payment information to the feds by Wednesday in order...

Beverley bullocks: Escaped cattle seen grazing in gardenson May 15, 2021 at 3:32 pm

The cattle, which had wandered from nearby fields, were later rounded up and returned home.A group of wandering cattle were seen grazing in people's...

Earth-size, habitable-zone planet found hidden in early NASA Kepler data

A team of transatlantic scientists, using reanalyzed data from NASA's Kepler space telescope, has discovered an Earth-size exoplanet orbiting in its star's habitable zone,...

Covid tests and masks: School prepares for return to classon February 23, 2021 at 6:43 pm

The BBC speaks to pupils, staff and parents at a school as they ready for in-person learning again."The tests, they're not very nice," he...
Home of Science
Follow me