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A notable Bank of America strategist said investors should fade any rebound in stocks off the government’s efforts to backstop the banking system this week, as the S & P 500 ‘s lows from last October will likely be revisited. “Stock lows to be tested one last time (in the) coming months,” wrote Michael Hartnett, chief investment strategist at Bank of America. “No equity capitulation and market too greedy for rate cuts … not fearful enough of recession.” After tumbling into a bear market, the S & P 500 is up 12% from its low last October. The emerging bank crisis this month stemming from the collapse of Silicon Valley Bank has put investors on edge before a key Federal Reserve decision on interest rates next week. The central bank is expected by economists to raise rates by a quarter point, it’s ninth hike in about the last 12 months. .SPX 6M mountain S & P 500, 6 months “Banking crises are followed by tighter lending standards and lower risk appetite,” wrote Hartnett. “We say ‘sell the last Fed hike’ (is the) correct strategy, as in inflationary ’70s/’80s.” How to know it’s over The strategist also made an interesting observation on what’s working this week. “In U.S. banking crisis past 10 days crypto/silver were ‘long panic’ plays, long 2-year Treasuries-short banks the ‘long contagion’ play, FAANG stocks a ‘long deflation’ play,” he wrote. BTC.CM= 5D mountain Bitcoin 1 week Bitcoin is up more than 30% this week, on pace for its best week since January 2021. The tech-heavy Nasdaq-100 is up more than 6%, on pace for its biggest weekly gain since November. When these trades unwind, we’ll know policy is working and the crisis is over, Hartnett said. — CNBC’s Michael Bloom contributed to this report.
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