On Friday, Bank of America’s (BOFA) chief investment strategist Michael Hartnett explained in a weekly financial note to clients that the U.S. economy could head into a recession. The BOFA strategist’s note further detailed that cryptocurrencies could outperform bonds and stocks.
BOFA Strategy Notes Inflation Shock Worsening. However, Cryptocurrencies Might Outperform Stocks and Bonds
Bank of America’s chief investment strategist has warned the U.S. economy could feel some economic shocks. The Fed felt it was necessary to manage inflation in America, which has been rampant in recent years. The U.S. Federal Reserve increased the benchmark interest rate by 6% on March 16th, the highest level since 2018 and expects to increase it six times more this year. Meanwhile, on April 8, Reuters reports that BOFA’s Michael Hartnett says that the macro-economic situation is worsening.
The BOFA strategist warned that the U.S. could face a recession due to the current macroeconomic climate. Hartnett said that the Fed raising rates and tapering large-asset purchases by the central bank are two signs of a deteriorating macro-economic environment. Hartnett insists that “‘Inflation shock’ worsening, ‘rates shock’ just beginning, ‘recession shock’ coming.” The BOFA analyst’s statements follow U.S. bond markets signaling that an economic downturn is predicted. The spread between 10-year Treasury yields and 2-year Treasury yields was inverted last week, signaling that the U.S. may soon be experiencing a recession.
Hartnett’s note to investors on Friday further said that commodities, cash, and cryptocurrencies “could outperform bonds and stocks,” according to the Reuters author Julien Ponthus. BOFA noted that emerging market equity fund’s market performance was better than those of debt vehicles over the last 10 weeks. Bank of America had much to say on cryptocurrencies over the past six months. For instance, a BOFA analyst said in January that the smart contract platform token Solana’s market cap could take market share away from the current leader Ethereum.
BOFA Institute Declares that Households are More Cash-Constrained, With Mortgage Rates Rising, BOFA downgrades 9 Transport Stocks
In December, BOFA explained it sees massive opportunity in the metaverse, and the month prior, the financial institution’s chief operating officer detailed that he does not see crypto as competition. According to BOFA’s recent outlook, the bank expects the Federal Reserve to raise the benchmark rate by 50 basis points during the next meeting. In addition, the April mortgage rate hit 5% which makes homeownership more expensive. BOFA has also downgraded nine transport stocks this week, after citing “deteriorating demand.”
While BOFA’s chief investment strategist explained on Friday that assets like cash, commodities, and cryptocurrencies could do well, Bank of America Institute’s chief economist David Tinsley said on Thursday that people have been preparing for inflation with a cash surplus. “On average, the lower-income household has about $1,500 more in the savings and checking account than it did pre-pandemic,” Tinsley during a Yahoo Finance Live interview.
What do you think about BOFA’s note to investors written by the bank’s chief investment strategist Michael Hartnett? Comment below and let us know how you feel about the subject.
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