Pressure in the bond market is also weighing on equities, which look set to continue falling from here, according to Bank of America’s top strategist, according to Bank of America’s top strategist. In normal times, investors seek the safe haven of fixed income when stocks fall. That means bond prices rise and yields fall accordingly. However, with central banks rapidly raising interest rates to keep inflation in check, fears of a recession are growing and making all assets toxic for investors in the coming years. this day. U.S. Treasury yields rebounded sharply on Friday, with 2-year notes, the most sensitive to Federal Reserve rate hikes, rising 7.4 basis points to 4. 2% around noon ET. “Inflation/rate/recession shocks are not over yet, plus the collapse in bonds in recent weeks means that credit spreads are high, lows in equities are yet to come.” , Michael Hartnett, investment strategist at Bank of America, wrote in his weekly note analyzing cash flow through the market. As consumer and producer prices rise and the Federal Reserve and global partners react, “the new regime of higher inflation means that the secular view remains cash, commodities, volatility, and cash.” move to outperform bonds and stocks,” he added. The stock market on Friday continued to head into a losing week after a mid-summer rally. The S&P 500 index fell more than 4.5%, while the Nasdaq 100, which is heavily skewed in technology stocks that make it particularly vulnerable to higher rates, also fell more than 4%. Bank of America’s main sentiment indicator is “deeply bearish,” Hartnett wrote, though that has yet to translate into a contrarian buy point. As a prescription for when investors can find opportunity, Hartnett put it: “Nibble at 3600 SPX, bite at 3300, gorge at 3000.” That would translate into the S&P 500’s respective losses from Thursday’s close of 4.2%, 12.2% and 20.2%. The index has lost more than 22% this year. The warning comes as other Wall Street houses are also lowering expectations. Goldman Sachs on Thursday cut its S&P 500 target to 3,600 and warned that things could get worse if the Fed raises interest rates resulting in a “hard landing” for the economy. In that case, Goldman said the index could fall 16% from current levels. Hartnett points out that policy uncertainty remains an issue. While central banks are tightening, financial regulators in the US, UK and elsewhere are continuing to deliver stimulus measures, offsetting the anti-inflationary benefits of higher rates. “Investors want policy coordination and policy credibility, and until they understand that, they will probably get to work,” Hartnett said.