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Investors should be selling into market strength until further notice, according to Bank of America’s top market expert. With investors on edge over President Donald Trump’s tariffs and all of their ramifications, the best bet is to wait for policymaker action before putting more money to work, said Michael Hartnett, the bank’s chief investment strategist. Bank of America’s recommendation is to “sell the rips,” Hartnett said in his weekly client note looking at money flows on Wall Street. Further, he advocates being long on the 2-year Treasury note despite the recent jump in yields and going short the S & P 500 “until a. Fed cuts break liquidation cycle [of higher yields, lower stocks and a declining U.S. dollar], b. US-China trade war eases to reverse recession momentum, c. US consumer purchasing power rises via real wages, < $3/gallon gas prices, big mortgage refi.” Unpacking that statement, the first part indicates waiting for the Federal Reserve to lower its benchmark borrowing rate, an event traders think will not happen until June. The other issues refer to the escalating tensions between Trump and Chinese President Xi Jinping as the two sides are engaged in a tit-for-tat tariff battle, and looking for inflation-adjusted worker pay to rise as gas prices fall, while consumers are able to refinance mortgages at lower rates. When those moments could happen is far from clear, but Hartnett said he sees 4,800 on the S & P 500 as a good reentry point “to buy risk assets if policy panic makes recession short/shallow.” That would represent about a 9% drop from Thursday’s close and a 22% tumble from the Feb. 19 peak. .SPX YTD line S & P 500 in 2025 Hartnett noted that sentiment indicators show investors are “insanely bearish” though that has not been borne out in money flows to equities. Part of that could be because Bank of America expects any recession to be “short/shallow,” with the impact eased by Fed rate cuts. However, he did point out that political risks remain with Trump’s approval rating dropping. “So both bond market and electoral base now pressing for US trade policy reversal; big risk is loss of political capital jeopardizes Trump admin ability to cut corporate taxes in H2 … latter would cause last bulls to capitulate,” Hartnett said. For portfolio positioning, he recommends long-dated U.S. corporate bonds, dividend-paying stocks and assets that benefit on U.S. dollar weakness.
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