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Bank of America strategist Michael Hartnett has expressed concerns about a potential bubble in equity markets following the Federal Reserve's recent interest-rate cut. Hartnett noted that Wall Street is optimistic, with expectations of 18% earnings growth for the S&P 500 by the end of 2025. He emphasized that this was the most 'demanded' Fed cut since the early 1980s due to the significant drop in front-end Treasury yields. Despite the euphoria, Hartnett cautioned that bubble risks are returning and recommended buying the dip in bonds and gold as a hedge against potential recession and inflation. He also highlighted that the 250bps cuts could lead to 15-20% EPS growth in 2025 and suggested international stocks as a good 'soft landing' play.
Michael Hartnett of BofA: It doesn’t “get much better than that for risk, so investors are forced to chase.” Still, he cautioned that “bubble risks” are returning and recommended buying the dip in bonds and gold.
Shot/Chaser BofA’s Michael Hartnett: The optimism in equity markets following the Fed’s move is stoking the risk of a bubble, making bonds and gold an attractive hedge against any recession or renewed inflation. In his latest Flow Show, he said stocks are now pricing in more Fed… https://t.co/7p5XoFBQPA
Hartnett @BankofAmerica said stocks pricing more Fed easing & ~18% earnings growth for S&P 500 by YE-2025. It doesn’t “get much better than that for risk, so investors forced to chase” the rally…he cautioned “bubble risks” returning & recommended buying the dip in bonds & gold.