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Bank of America strategists believe that aggressive rate hikes are not a prelude to ‘Goldilocks’ but rather to a hard landing and credit events.
“Bad “crashy vibes of March” set to worsen absent a soft Feb payroll number,” the strategists warned clients in a note.
The jobs report is due later today with the Street expecting that the U.S. added around 205,000 jobs in February. Several market analysts warned that any number above 300,000 could prompt the Fed to hike by 50 basis points in March.
“1 year ago Fed funds was 0%, yield curve 40bps steep; today Fed funds 4.5% (heading toward 6%) and yield curve 100bps inverted,” the strategists highlighted.
They also believe that the S&P 500 could soon break its “neurotic” trading range.
“[It] ends once data unambiguously recessionary (e.g. negative US payroll >-200k) and yield curve steepens; if oil, HY, SOX, banks, EM catch bid…SPX heads toward 5k; if not SPX heads toward 3k.”
Over $18 billion and $8.2B went to cash and bonds in a week to Wednesday, respectively. Outflows from equities were around $500 million.
