On Friday, Bank of America’s (BOFA) chief investment strategist Michael Hartnett explained in a weekly financial note to clients that the U.S. economy could head into a recession. The BOFA strategist’s note further detailed that cryptocurrencies could outperform bonds and stocks.
BOFA strategist notes inflationary shock worsens, cryptocurrencies could outperform bonds and stocks
Bank of America’s chief investment strategist has warned that the US economy could suffer economic shocks. Inflation in the United States has taken its toll lately and the Fed felt the need to step in and manage the problem. On March 16, the US Federal Reserve raised the benchmark discount rate for the first time since 2018, and the central bank expects six more hikes this year. Meanwhile, on April 8, Reuters reports that BOFA’s Michael Hartnett says the macroeconomic situation is deteriorating.
With the macro-economic environment in calamity, the Fed hiking rates, and the central bank tapering large-asset purchases, the BOFA strategist said the U.S. economy could be headed for a recession. Hartnett insists that “‘Inflation shock’ worsening, ‘rates shock’ just beginning, ‘recession shock’ coming.” The BOFA analyst’s statements follow U.S. bond markets signaling that an economic downturn is predicted. This took place last week when the spread between 2-year and 10-year Treasury yields inverted, signaling the U.S. economy may be headed for a recession.
Hartnett’s note to investors on Friday further said commodities, cash and cryptocurrencies “could outperform bonds and equities,” according to Reuters author Julien Ponthus. The BOFA rating indicates that over the past ten weeks, emerging market equity funds have outperformed the market, as have debt vehicles. Over the past six months, Bank of America has had a lot to say about cryptocurrencies. For example, a BOFA analyst said in January that the market cap of smart contract platform token Solana could take market share away from current leader Ethereum.
Mortgage Rates Rise, BOFA Downgrades 9 Transport Stocks, BOFA Institute Says Households Have More Cash on Hand
In December, BOFA explained it sees massive opportunity in the metaverse, and the month prior, the financial institution’s chief operating officer detailed that he does not see crypto as competition. According to BOFA’s recent outlook, the bank expects the Federal Reserve to raise the benchmark rate by 50 basis points during the next meeting. Furthermore, mortgage rates hit 5% in April making homeownership a touch more expensive. BOFA has also downgraded nine transport stocks this week, after citing “deteriorating demand.”
While BOFA’s chief investment strategist explained on Friday that assets such as cash, commodities and cryptocurrencies could do well, Bank of America Institute chief economist David Tinsley said Thursday that people were bracing for inflation with excess cash. “On average, the low-income household has about $1,500 more in their savings account and checking account than before the pandemic,” Tinsley said during a Yahoo Finance Live interview.
