BofA's Hartnett Stays Risk-Off Through Mid-November, Sees Stocks, Dollar and Yields Falling Together

Bank of America strategist Michael Hartnett expects the risk-off mood to persist until mid-November, with bond yields, equities and the dollar potentially falling in tandem. In a note to clients Friday, Hartnett said the bank is "tactically bearish into mid-November," citing anxiety over the AI trade and U.S. midterm elections. Hartnett said markets have yet to price in the possibility of Democrats winning both the House and Senate, an outcome he said would end the current low-tax, low-regulation regime and weigh on corporate earnings growth. He flagged a reversal of the French government bond selloff by the ECB or Paris as a possible trigger for a return of risk appetite. He also pointed to the bond spreads of AI hyperscalers. A peak in those spreads — via capital expenditure cuts or an announced "mega" equity raise — could ease market pressure, he said. Despite the concerns, flows into AI remain strong. BofA cited EPFR Global data showing tech stocks drew their largest weekly inflow since July, while its survey this month showed global investors' tech exposure at its highest since August 2020. Recent days have brought a shift toward defensives, with the S&P 500 equal-weight index posting its best day versus the cap-weighted benchmark since 2024 on Thursday and consumer staples on track for their best month since 1998.