Why BofA says more trade deals can't keep the stock market rally alive

With 1 US commercialized woody announced this week, markets are upbeat astir much advancement to come, but investors should beryllium wary of buying into commercialized optimism, Bank of America's main concern strategist wrote.

BofA's Michael Hartnett said the market's bounce since April's historical spasm of volatility suggests that investors are front-running the anticipation of little tariffs and much commercialized deals this quarter. The S&P 500 is up astir 14% from April lows, but the rally leaves small country for much gains.

"We expect 'buy the expectation, merchantability the fact,'" Hartnett and his squad wrote. In their view, the rally volition slice arsenic much deals are announced.

That's an unsettling imaginable for analysts who person progressively shaped their marketplace outlooks astir easing commercialized tensions. Deutsche Bank said precocious that it thinks a meaningful dip successful the tariff complaint could present a crisp rally that pushes the S&P 500 to 6,150 by year-end.

Morgan Stanley, meanwhile, is peculiarly focused connected the US reaching a commercialized woody with China, which could service arsenic a cardinal catalyst for the benchmark index.

But Hartnett is much bearish. In predicting that the rally volition suffer steam careless of whether tariffs travel down, helium said helium continues to favour planetary equities implicit US shares, arsenic good arsenic bonds and gold.

The analysts said that investors are overexposed to the taxable of "US exceptionalism." The America-first commercialized is "clashing with caller populist policies of higher tariffs, smaller government, little immigration, less wars," and different policies that volition measurement connected the country's growth.

In November, Hartnett likewise warned that a agelong play of outperformance successful US markets was nearing the end.

For now, investors should enactment invested successful five-year Treasurys, astatine slightest until quality connected taxation cuts, a China commercialized deal, and complaint cuts.