BofA’s Hartnett Says Bonds Rally May Drag on Stocks in Early ‘24

Stock markets will suffer in the first quarter of 2024 as a rally in bonds would signal sputtering economic growth, according to Bank of America Corp.’s Michael Hartnett.

The strategist — who has remained bearish even as the S&P 500 rallied about 19% this year — said lower yields were one of the main catalysts of equity gains in the current quarter. However, a further drop toward 3% would mean a “hard landing” for the economy.

The narrative of “lower yields = higher stocks” would flip to “lower yields = lower stocks,” Hartnett wrote in a note dated Dec. 7.

A rally in US stocks has just about stalled this month after one of the best November gains in a century, as investors consider when the Federal Reserve is likely to start cutting interest rates. The US 10-year bond yield has retreated to about 4.2% after hitting 5% in late October, the highest since 2007.

US Stock Rally Has Stalled in December