BofA's Hartnett Warns Risk-Off Mood to Persist Until Dollar, Bond Yields Peak

Bank of America strategist Michael Hartnett said investors will avoid riskier assets until the dollar's recent surge peaks and rising bond yields retreat from multi-decade highs, according to a note published Friday. The Bloomberg dollar index has climbed 3% from a September low as investors rebuild cash cushions by exiting riskier positions. The move coincides with bond yields reaching their highest levels in more than two decades, driven by inflation pressures linked to the Iran war, expectations of further monetary tightening, and strong corporate earnings. Hartnett recommends "buy the humiliation" by adding bonds to portfolios. He said aggressive Treasury buybacks by the US administration could establish a floor, particularly if rising yields threaten the AI investment boom ahead of November's midterm elections. Downside risks would intensify if small- and mid-cap stocks joined banks in steep declines, signaling peak growth optimism.