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In its Chronicle of Shocks to the US Economy and Market, BofA says the inflation shock is worsening, the interest rate shock is just beginning and the recession shock is on the way.
“Inflation is causing recessions,” and inflation is out of control, strategist Michael Hartnett and his team wrote on Friday on their weekly Flow Show.
The S&P 500 (SP500) (NYSEARCA:SPY) will fall below 4,000 this year, while the 30-year Treasury yield (NYSEARCA:TBT) (TLT) will climb above 4% in 2023, Hartnett said.
They also predict that the ISM manufacturing index will fall below 50 while EPS growth will turn negative by the end of the year, outperforming crypto bonds.
Price action is “very recessionary,” Hartnett added, noting that construction companies (XHB) (NAIL) are down 30%, chips (SOXX) (SMH) are down 23%, small caps (IWM) are down 20% % are down, Retail (XRT) (ONLN) is down 20% and Private Equity (PSP) (PEX) is down 19%.
Customer Feedback: “Recession now soooo consensus”, “No one wants to get cocky before 50bps & QT” and “Oil says war shock over.”
WTI (CL1:COM) (USO) and Brent (CO1:COM) (BNO) are now at pre-Ukraine prices.
Disruptions you can expect in a recession are yields up and banks (KBE) down, yields up and reopening stocks down, utilities (XLU) up and transportation (XTN) (IYT) down and a steeper yield curve before the recession hits, hey called.
Deutsche Bank said this week its baseline scenario is now a late-2023 recession.
