Summer Rally Bandwagon is Growing, Most Investors Expecting Bear Market Rally to Play the ‘Jackson Hole Pivot’

By Senad Karaahmetovic

Investors are buying US equities again with flows in a week to Wednesday the biggest in the last 10 weeks, according to Bank of America’s top strategist Michael Hartnett.

As much as $20.6 billion was poured into equities with outflows from cash at $28.2 billion. However, the tech sector witnessed the 5th week of outflow at $1 billion. Similarly, the market saw the 8th week of outflows from financials ($1.2 billion) while consumer stocks recorded the largest inflow in 5 months ($1.2 billion).

“Summer rally bandwagon growing…bears (see plunging BofA B&B Indicator) + “peak” inflation + Fed “pause”; most oversold assets relative to 200DMA, i.e. vulnerable to tradable bounce,” Hartnett said in a client note.

In the meantime, BofA Bull & Bear Indicator is at 0.6, which is yielding an “unambiguous contrarian buy” signal, Hartnett notes.

Recent talks with investors showed that the overall mood is bearish, “so bearish most expecting bear market rally to play the ‘Jackson Hole pivot’.”

The strategist also said that BofA will continue to fade rallies and sees SPX going to 4200 at the maximum.