Equities, BofA warns of a “recession shock” in early 2023 From Investing.com


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Investing.com – US equities may rally in the final quarter of the year given their extremely bearish positioning, but in 2023 the market is likely to fall again, especially in the early months when the “recession shock” “will begin to make itself felt.

This is the opinion of the strategists of Bank of America (NYSE :), who warn of the impending recession that will lead to “new highs in credit” and “new lows for the stock market, most likely in the first quarter of next year”.

“The trade in the event of a recession is always long bonds, short stocks; long yield curves and more bearish commodities, and short on the dollar to hedge a possible premature policy pivot by the Fed, they wrote in a note to clients.

The experts also noted that the long-term yield on US government bonds fell to a 50-year lows of 0.7% from 9.7% in March 2020.

“US Treasuries annualize a 23% YTD loss, the worst since 1788 and the second consecutive annual loss; the last time there were 2 consecutive years of UST losses … 1958-59, the last time that there was a loss of> 5% UST followed by a negative yield … 1861; the last time there was 3 consecutive years of US government bond losses … never; 250 years of history tells us that returns on US Treasuries will turn positive in 2023, “they added.

In the week leading up to Wednesday, October 26, a whopping $ 28.4 billion went into cash and $ 22.9 billion in shares, the largest inflow in the past 7 months. The strong inflows were mainly fueled by the technology sector ($ 2.3 billion).

In addition, BofA said there was the largest inflow of emerging market equities since April and financials in 9 weeks.

BofA then noted that Bank of America’s Bull & Bear indicator remains at 0, signaling the maximum downside for the sixth consecutive week. “Sentiment, as we all know, is still the best for the fourth quarter rally,” the investment bank concluded.

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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