While many investors remain bullish on the Federal Reserve’s rate hike easing, Bank of America strategists are recommending selling on the market rally ahead of likely 2023 job losses, according to Sagarika Jaisinghani at Yahoo Finance.
“ Bears (like us ) worry that unemployment in 2023 will be as impactful to general consumer confidence as inflation in 2022,” the strategists led by Michael Hartnett wrote in a note showing that global stock funds they just had their biggest weekly departures in three months. “We are selling risk rallies from here,” Hartnett said, reiterating his preference for bonds over stocks in the first half of 2023.
Stocks have rallied in the past two months on bets that the Fed will be able to control inflation in time to avoid a recession. That was reinforced earlier this week after Chairman Jerome Powell signaled the central bank was ready to slow the pace of rate hikes , but data on Friday showed employers added more jobs than expected in November , indicating that labor demand is still too strong. Contracts on the Nasdaq 100 fell 2.3% after the report.
Bank of America is not alone in its negative stance on the stock. The market strategy teams at JPMorgan and Goldman Sachs also warned of further declines early next year amid the specter of an economic downturn.
Strong outflows of funds
According to the Bank of America note, global stock funds had outflows of $14.1 billion in the week to November 30 , led by outflows from US stocks. About $2.4 billion flowed out of global bonds , while cash funds had inflows of $31.1 billion , the note showed, citing data from EPFR Global. European equity funds posted 42 consecutive weeks of redemptions.
In style, large-cap US companies had outflows of $14.5bn , while small-cap, growth and value funds also saw redemptions. Among sectors, utilities and health care had inflows , while $600 million came out of finance.
Bank of Americait is trading at $36.15 and the 200-period moving average is below the last candle. Meanwhile, Ei indicators are mixed.