Michael Hartnett, the chief investment strategist at Bank of America, knows markets haven’t been listening. But he continues to say “sell the vaccine,” as he warns about bubble conditions not just in stock but other asset markets.
In his weekly “flow show” report, Hartnett outlined the “violent inflationary price action” over the last two months that has seen bitcoin
BTCUSD,
+2.99%
jump 180%, steel stocks
XME,
-2.38%
surge 61%, European banks
SX7E,
-1.13%
gain 48%, U.S. regional banks
BKX,
-1.19%
rise 41%, small-cap value stocks jump 37%, and emerging-market material stocks rise 38%.
He said a “toxic brew” of frothy prices, greedy positioning, inflationary forces, desperate policy makers, and “peaky China” will eventually hit stocks, possibly this quarter. But not now. “Thus far premature call as weak vaccine rollout, blue wave and Powell/Yellen gravy give investors free call option for risk,” he says, referring to Federal Reserve Chair Jerome Powell and Treasury secretary nominee Janet Yellen.
The value of U.S. financial assets are now six times the size of gross domestic product. “Wealth gains obscene, but extreme asset bubbles natural end to nihilistic bull markets of past decade,” he said.
The S&P 500
SPX,
+0.12%
ended Thursday at a record and has gained 70% from the lows of March.
