S&P 3,600 is the new bull case; sell rips and watch yen for a crash warning

Pessimism is pervasive throughout the fairness market and traders are telling BofA Securities that a even more 8% drop in the S&P 500 (SP500) (NYSEARCA:SPY) is a bullish situation.

“Heard on the Road: ‘3600 is the new bull scenario,'” strategist Michael Hartnett stated in his weekly Flow Clearly show be aware Friday.

U.S. GDP was $24.4T in Q1 and the global equity current market cap collapse since the Nov 2021 peak has been $23.4T.

The “stock current market in essence dropped by 1 US financial state in 6 months,” Hartnett reported.

But equity flows are not at capitulation ranges and his stance is even now “market-any-rips.”

Investors ought to also observe the yen (FXY) as very significantly each and every stock market place crash in the previous 40 yrs has witnessed “sharp, fast yen appreciation.

Of the “19 US equity bear markets past 140 calendar year (the) normal rate decrease = 37.3% & normal period 289 days,” he noted.

IF that were to be repeated, modern bear marketplace finishes on Oct. 19 2022 with the S&P at 3,000 and the Nasdaq (COMP.IND) (QQQ) at 10,000. The yen and the Swiss franc are hedges for this.

The bearish unanticipated cyclical dangers are:

Wall Street belongings being 6.3x U.S. GDP. As “noticed in 2020 the fastest route to a deep economic downturn is through a Wall St crash (and vice-versa).”

Housing and labor markets are “only just at inflection points.” The U.S. household purchase index is falling. Retail layoffs could sting as retail has accounted for 12% of all position gains in excess of the previous two many years and leisure and hospitality has accounted for 33%.

Inflation “hinders Fed reaction operate, polarization hinders fiscal plan reaction function in a disaster, recession.”

“Banking companies (are) arguably safest portion of fiscal process nonetheless (BKX) index trades under highs of ’07, ’18, pre-COVID ’19. A split underneath 100 would scream economic downturn and/or credit history celebration (and) tighter lending expectations in coming quarters.”

The “leveraged bank loan industry (is) cracking, systemic possibility from bond/stock/serious estate deleveraging in chance parity (RPAR), private equity (PSP) significant, PE publicity to syndicated financial loans higher, sovereign wealth cash, credit history situations in speculative tech, shadow banking, US purchaser purchase now, shell out afterwards types, European credit rating/banking institutions/housing, Rising Markets, zombie organizations, and so on … and the Fed has not nevertheless started QT.”

Goldman Sachs lately issued its playbook for a recession.