© Reuters. Purchase the final hike in treasuries and IG bonds, shares may go both approach – BofA
By Investing.com Employees
In at the moment’s weekly stream present report, BofA Securities strategists mentioned the final fed price hike, which may occur as early as February 2023 however most definitely in March 2023, and the way traders ought to place.
The strategists stated underneath a crashing oil state of affairs, the Fed may increase 50bps on Dec. 14th, 25bps on Feb. 1, and preserve charges on March 2nd. In the meantime, underneath a cooling housing state of affairs, the Fed would go 50/25/25 bps at these three conferences. A strong credit score market would imply 50/50/25 bps, and a sizzling labor market would imply 50/50/50 bps.
On what traders ought to do, Hartnett factors to historical past, which exhibits “purchase the final hike” in shares was the correct technique utilizing current disinflationary inventory market historical past. Nonetheless, the strategists observe that within the inflationary ‘70s/’80 interval, “promote the final hike” in shares was the proper technique.
Shopping for treasuries on the final hike labored 9 out of 10 instances during the last 50 years, the strategists famous. In the meantime, investment-grade bond returns had been additionally constructive 9 out of 10 instances during the last 50 years following the final price hike.
On greenback/gold, purchase US greenback, promote gold was the proper technique after the final hike in inflationary ‘70s/’80s, however a wash previously 30 years of disinflation, they observe.
Taking a look at weekly flows, the strategists highlighted influx to gold funds of $65 million, outflow from bonds $0.1 billion, money $5.7 billion, and shares of $5.7 billion.