December 1, 2023
Bank of America’s Michael Harnett believes the market is ignoring the risks of a hard landing in 2024

According to Bank of America, stocks and the economy prospered in 2023 despite persistent inflation and many other challenges, but they may not be so lucky in 2024. Investment strategist Michael Hartnett said in his forecast for the year ahead that the bank expects the coming year to be more challenging, with markets reducing the risks that could make bonds and cash attractive and riskier assets such as stocks. Can reduce assets. “Bulls outperformed bears like us in 2023, but we see bearish conditions, bearish profits and policy easing, turning the classic combo of the 3Ps into a ‘complete bull,’” Hartnett wrote in a report to clients on Sunday. “Looking forward to it.” “We believe the risk of a ‘hard landing’ for the economy is higher than expected.” In that kind of environment, Hartnett expects commodities including copper and oil to outperform bonds and cash. As per the forecast, very little attractive returns await in global stocks, gold and the US dollar. As a firm, BofA actually raised its S&P 500 forecast in September to one of the most bullish on Wall Street, predicting the index would end the year at 4,600. That means a 1.5% rise here over the course of a year, with the large-cap barometer rising 18% after a tough 2022. However, Hartnett said the bank expects global stocks to advance only 2%-4% next year. Copper and oil are delivering double-digit returns and high-yield and investment-grade bonds are also leading the way. “We are sellers of bearishly crowded ‘no landing’ plays, including semiconductors, homebuilders and biotech as well as the “Magnificent Seven” tech stocks,” Hartnett said in a call. Companies are buyers of ‘hard landings’ at the start of a recession,” including REITs, banks, defensive stocks, small-cap stocks and China. “If US recession leads to Fed/politician inflation close to 2% in election year. get easily nervous before arriving, so [would be a] Leverage quality over quality, large over small, value over growth, catalysts for better performance internationally than the US,” he said. Despite Hartnett’s warnings, BofA is looking for a soft landing with easy monetary policy overall. He expects the Federal Reserve to begin cutting interest rates in June and to implement a three-quarter percentage point cut by the end of the year.


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