- Stocks are in a “late secular bull market,” BofA’s Michael Hartnett said in a research note Friday.
- It will either end in a bubble or a recession, he warned.
- Stocks have struggled recently as investors worry about stubborn inflation and slow growth.
The bull market that has pushed stock prices higher for a year and a half will likely end in tears, Bank of America’s Michael Hartnett warned.
Stocks are in a “late secular bull market” that “will likely end in (a) bubble and/or recession,” the bank’s chief investment strategist wrote in a research note seen Friday by Business Insider .
Hartnett has been warning for months that stocks are closing in on bubble territory. Since October 2022, the S&P 500 index has climbed more than 40%, thanks to the AI investment craze and a better-than-expected economy.
However, this recovery has stalled in recent months as investors began to worry about stubborn inflation and slowing growth.
The Federal Reserve also signaled that it would likely delay cutting interest rates until the second half of 2024, which further weighed on valuations.
Hartnett also said the economy could be heading toward a period of stagflation, citing Friday’s April jobs report as a key data point.
Spring GDP and consumer price index numbers look “stagflationary,” he wrote, adding that the market would likely view a lower-than-expected monthly nonfarm payrolls figure as “a risk aversion. The 175,000 jobs created were considerably lower than the 238,000 predicted by economists.
JPMorgan this week also flagged stagflation – a combination of high inflation and sluggish growth – as a potential threat to the economy.
“While risk markets worry about overheating that would undermine rate cuts, contrary to the overheating story, recent GDP points to a stagflationary direction relative to market expectations,” a team-led said by equity strategist Marko Kolanovic in a research note.
Hartnett’s bearish stance conflicts with the opinion of Savita Subramanian, head of U.S. equity and quantitative strategy at BofA, who predicted the bull market in stocks would last.
As talk of the threat posed by stagflation intensifies, the economy appears resilient enough to continue propelling stocks higher, she said in a research note Thursday.
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