Bank of America’s chief investment strategist Michael Hartnett warned that the U.S. dollar risks weakening if efforts to cap 30-year Treasury yields below 5% fail, as intervention risks mount amid persistent market pressures.
Hartnett, citing Treasury Secretary Bessent’s policy objectives, noted the administration is targeting 3% GDP growth, a 3% budget deficit and a 3 million barrels-per-day increase in oil output—metrics he described as "0 a 3," reflecting the challenges in balancing economic priorities. The BofA Bull & Bear Indicator rose to 9.5 from 9.3, placing it firmly in "sell" territory and signaling elevated caution among investors.
Global equity markets attracted $40.1 billion in inflows during the prior week, the largest volume in three weeks, while fixed income assets saw $21.4 billion in new investments. U.S. Treasury bonds recorded $7.4 billion in inflows, the highest in six weeks, and investment-grade corporate bonds extended their 20-week inflow streak with $7.5 billion in new funds. Emerging market debt also saw its largest inflow in 11 weeks, totaling $3.3 billion.
Outflows were concentrated in specific sectors, with Korean equities posting their first redemptions in eight weeks at $800 million, semiconductor funds extending a three-week outflow streak to $6.3 billion and financial sector funds suffering their largest withdrawal in 11 weeks at $2 billion. European equity funds, by contrast, recorded their third consecutive week of inflows, totaling $200 million.
Hartnett highlighted the "Anything But Bonds" dynamic, where investors increasingly favor equities and AI-related funding over government debt, while referencing a series of "Bessent puts"—policy measures aimed at stabilizing markets. The strategist also pointed to the ProPicks AI Tech Titans strategy, which has outperformed the S&P 500 since its November 2023 launch, with notable gains in Siemens Energy (+231.5%) and Sandisk (+189%).
The outlook remains contingent on the Federal Reserve’s ability to manage long-term yields and sustain investor confidence amid shifting policy priorities.
