Hot November NFP report will end ‘chase rally’ – BofA’s Hartnett

By Senad Karaahmetovic

It appears that more and more investors are willing to bet that the relief rally in the U.S. stocks won’t end near current levels. Bank of America’s data shows U.S. equities attracted $22.9 billion in inflows in the week to Wednesday.

“Chase is on,” says the bank’s Chief Investment Officer Michael Hartnett after the BofA Bull & Bear Indicator rose to 0.4 from 0.0, marking the first rise in 9 weeks and signaling improving risk sentiment.

“Bull & Bear indicator highest level since Sep’22; tells you without crucial necessary condition of policy panic that fair chunk of bear market rally behind us,” Hartnett said in a client note.

The talk about the Fed pivot is accelerating, which fuels the year-end “rally chase.”

“We say fade SPX >41k + hot Nov payrolls ends it,” stated Hartnett, before adding that the first half of 2023 may be marked by a rally in bonds, followed by a jump in equities in the second half of the year.

BofA’s CIO also discussed signals that the bond market is sending.

“US 2s10s yield curve most inverted since Feb’82; inversion best lead indicator of recession past 50 years, but steepening best indicator recession has begun & “pivot” imminent; neither happening until historic low unemployment rates surge (latest US 3.7%, UK 3.6%, Canada 5.2%, Australia all-time low 3.4%…),” Hartnett added.

Other economic indicators (e.g. pending home sales down, lumber down, global freight rates down, PPI negative, etc.) are also signaling that the recession is coming, according to Hartnett.

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