BoA's Bull & Bear Indicator at 8.8 Signals Sell Despite 5% Bond Yields
BAC•Bank of America strategist Michael Hartnett warns that allocations remain bullish despite 5% long-term bond yields, citing rising capital costs, weakening leadership and election-driven pressures. BoA’s Bull & Bear Indicator hit 8.8, extending a sell signal, while technology funds attracted a record $12.3 billion in inflows.
1. Contrarian Risk Asset Positioning
Michael Hartnett notes that despite long-term bond yields reaching 5%, institutional allocations remain heavily bullish. He highlights rising capital costs, weakening leadership among market favourites and potential election-driven policy shifts as early signs of bull market exhaustion.
2. 1994 Fed Easing Parallel
Hartnett draws parallels to 1994 when unexpected employment strength ended a Fed easing cycle, triggering aggressive rate hikes and prolonged equity consolidation. He warns that similar dynamics could unfold in 2026 if inflation and job growth trends persist.
3. Sell Signal and Fund Flows
BoA’s Bull & Bear Indicator climbed to 8.8, marking a fourth week of sell signals driven by continued tech inflows and outflows from high-yield debt. Technology-focused equity funds alone attracted $12.3 billion, underscoring entrenched risk appetite despite rising yields.
