Latest news with #MichaelHartnett
Yahoo
3 days ago
- Business
- Yahoo
Bank of America explains how a market bubble could soon form — and lays out the perfect trade to combat it
BofA analysts say risks of a stock market bubble in the second half are building. The bank's Michael Hartnett said expectations for rate cuts and lower taxes are fueling inflows to stocks. His team says a top trade is owning US growth stocks and international value stocks. A Bank of America analyst sees the risk of a speculative stock market bubble increasing as expectations that the Federal Reserve will cut interest rates continue to rise. In a note on Friday, BofA's Michael Hartnett highlighted a shift that he sees approaching, one that could lead to complications for investors—and he also shared his view on a trade to hedge such a scenario. Geopolitical tensions and tariff updates from President Donald Trump have been headwinds for markets. But with the Israel-Iran ceasefire continuing to hold, the focus has shifted to the possibility of interest rate cuts in July. Federal Reserve chairman Jerome Powell opted to leave rates steady at this month's meeting, but several top officials since then have come out in support for a cut as soon as next month. As Hartnett's team sees it, investors have begun to adjust for a higher likelihood that Powell will pivot in his stance and cut interest rates. On top of that, Trump's "Big Beautiful Bill" is likely to result in lower taxes for corporations and some households. "H2 bubble risk high as Trump/Powell pivot from tariffs to tax cuts/rate cuts to incite US$ devaluation/US stock bubble," Hartnett wrote. Hartnett and his team go on to say that the best way for investors to play the market against the backdrop of a potential bubble is by owning US growth stocks and international value stocks, presenting it as a means of finding a balance between risk and reward. They highlight this strategy as an effective way to guard against the potential impact of the predicted second-half bubble, as it offers exposure to growth in both US and international markets. Other experts have shared similar strategies for handling this year's high levels of market and economic uncertainty. Investor Bill Gross said this week he was eyeing a small bull market for stocks and a small bear market for bonds, highlighting the strategy of buying one and selling the other. Read the original article on Business Insider
CNBC
3 days ago
- Business
- CNBC
Equity investors showing greed, so may be time to take profits, says Bank of America's Hartnett
Overflowing investor enthusiasm is close to triggering some reliable sell signals in the stock market, according to Bank of America chief investment strategist Michael Hartnett. Money is pouring into equities as well as their fixed income counterpart, high-yield bonds, indicating that investor willingness to shrug off geopolitical headwinds is approaching danger levels, Hartnett said in his weekly note that examines where investors are putting their cash. "Greedy inflows saying take some profits off the table," the strategist wrote. One specific area where he pointed was the flows to global equity and high-yield fixed income. Over the past four weeks, the two categories have taken in 0.99% of cash relative to assets under management — just one one-hundredth of a percentage point from a tactical sell signal. Conversely, outflows exceeding 1% have been a reliable contrarian buy sign of excessive pessimism. The observations come with the S & P 500 punching through to a new record Friday as investors show a strong willingness to overlook a multitude of headwinds , from geopolitical tensions to President Donald Trump's tariffs. .SPX YTD line S & P 500 performance in 2025. There are other potential danger signs amid all the bullishness: BofA's Bull & Bear indicator of sentiment is at 5.8, the highest since November 2024. Also, nearly three-quarters of global stock indexes are trading above their 50- and 200-day moving averages. When that number, currently at 73%, hits 88%, that's been a good time to sell, Hartnett said. Hartnett said the S & P 500 above 6,300 would trigger a sell — still nearly 2% away, but a number to watch. U.S. stocks this year are on pace for their third-largest inflow of new cash ever, with $164 billion rolling in so far, according to BofA data. Large caps are on pace for record inflows, while small caps are on track for record outflows.
Yahoo
3 days ago
- Business
- Yahoo
BofA's Hartnett Sees Risk of Stock Bubble on Fed Pivot, Tax Cuts
(Bloomberg) -- The risk of a speculative stock-market bubble is increasing as expectations of US interest-rate cuts draw massive investment flows into equities, according to Bank of America Corp.'s Michael Hartnett. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Mapping the Architectural History of New York's Chinatown US State Budget Wounds Intensify From Trump, DOGE Policy Shifts With the US moving closer to trade deals with China and other partners, tariff wars and geopolitics are becoming less of a concern for investors. Instead, they are pricing a greater chance of Federal Reserve rate cuts and waiting to see if President Donald Trump's tax bill is passed in Congress next month. A 'pivot from tariffs to tax cuts/rate cut' could lead to a high risk of a bubble in the second half of the year, and a further weakening of the dollar, Hartnett's team at BofA wrote in a note. Already this year, $164 billion has flowed into US equities, on course for the third-largest annual inflow in history, the note said, citing data from EPFR Global. The S&P 500 index is within striking distance of a record high, while 10-year Treasury yields have slid more than 30 basis points off their May highs. Swap markets are currently expecting that the Fed will cut rates four times over the next 12 months. The 'best way to gain exposure is via 'long US growth/long global value' equity barbell,' Hartnett added, referring to an investment strategy that seeks to strike a balance between risk and reward. Yet absent a bubble in artificial intelligence, earnings growth acceleration is the 'most plausible upside surprise' for US and global stocks in the second half of the year, the team added. America's Top Consumer-Sentiment Economist Is Worried How to Steal a House Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Apple Test-Drives Big-Screen Movie Strategy With F1 Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags ©2025 Bloomberg L.P.
Bloomberg
3 days ago
- Business
- Bloomberg
BofA's Hartnett Sees Risk of Stock Bubble on Fed Pivot, Tax Cuts
The risk of a speculative stock-market bubble is increasing as expectations of US interest-rate cuts draw massive investment flows into equities, according to Bank of America Corp.'s Michael Hartnett. With the US moving closer to trade deals with China and other partners, tariff wars and geopolitics are becoming less of a concern for investors. Instead, they are pricing a greater chance of Federal Reserve rate cuts and waiting to see if President Donald Trump's tax bill is passed in Congress next month.
Globe and Mail
18-06-2025
- Business
- Globe and Mail
The "Magnificent Seven" Stocks Could Help This Unstoppable Vanguard ETF Turn $200,000 Into $1 Million in Under 15 Years
In 2023, Wall Street analyst Michael Hartnett from Bank of America assigned a nickname to a group of seven of America's largest technology stocks -- not just for their size, but also their ability to consistently beat the S&P 500 (SNPINDEX: ^GSPC) index. He called this group the "Magnificent Seven," and they have delivered a median return of 886% over the last 10 years, compared to a return of 185% for the S&P: NVDA data by YCharts In other words, investors who haven't owned the Magnificent Seven stocks over the last decade have probably underperformed the broader market by a very wide margin. But here's the good news: The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) offers investors a simple way to buy them all, with a splash of diversification. It's an exchange-traded fund (ETF) that invests exclusively in America's largest companies, and the Magnificent Seven account for over half of the total value of its entire portfolio. Here's how the ETF could turn an investment of $200,000 into $1 million over the next 15 years (or less). The Magnificent Seven represent half of the value of this ETF The Vanguard Mega Cap Growth ETF tracks the CRSP U.S. Mega Cap Growth Index, which invests in the top 70% of the cumulative market capitalization of the CRSP U.S. Total Market Index. The CRSP U.S. Total Market Index holds each of the 3,537 stocks listed on American exchanges. The U.S. Mega Cap Growth Index (and by extension, the Vanguard ETF) only holds 69 stocks, which highlights the incredible concentration of wealth in corporate America. To put it another way, just 69 companies represent 70% of the entire value of the 3,537 companies listed on American stock exchanges. It isn't entirely surprising considering the Magnificent Seven stocks have a combined market capitalization of $17 trillion, which they have accumulated by dominating various subsegments of the technology industry including cloud computing, semiconductors, e-commerce, social media, and electric vehicles. As a result, the Magnificent Seven stocks alone represent 56.3% of the total value of the Vanguard ETF's portfolio of 69 stocks: Data source: Vanguard. Portfolio weightings are accurate as of May 31, 2025, and are subject to change. Each of the Magnificent Seven companies are now focused on artificial intelligence (AI), which could be their largest financial opportunity ever. Microsoft, Amazon, and Alphabet have created their own AI models and chatbots, but they also operate some of the world's best data centers, which they rent to other AI developers for profit. Even the smallest Magnificent Seven company, Tesla, is now a leading developer of AI-powered autonomous driving software. But it's Nvidia that has become the poster child for the AI revolution thanks to its graphics processing units (GPUs) for the data center, which are the most powerful chips for developing AI models. As I mentioned earlier, the Vanguard Mega Cap Growth ETF gives investors an opportunity to own the Magnificent Seven stocks in a more diversified manner than buying them outright. Within its top 20 holdings, investors will find several popular non-technology stocks like Visa, Eli Lilly, Costco Wholesale, McDonald's, and Intuit. Turning $200,000 into $1 million in under 15 years The Vanguard Mega Cap Growth ETF has delivered a compound annual return of 13% since it was established in 2007, beating the S&P 500 which has generated an average annual gain of 10.1% over the same period. A 13% annual return would be enough to turn an investment of $200,000 into $1 million within around 13 years and three months. In fact, the ETF could still deliver a fivefold return within 15 years even if its annual return slowed to 11.3%. However, returns appear to be accelerating instead. The ETF has delivered an annual gain of 16.1% over the last 10 years, a 17.8% annual gain over the last five years, and a 20.7% annual gain over the last three years. The surging dominance of the Magnificent Seven stocks and their peers across the tech and tech-adjacent industries are the main drivers of those increased returns. I'm not suggesting they will remain at those elevated levels over the long run, but AI could certainly help the Vanguard ETF maintain its above-average performances for the next few years at least. Global consulting firm PwC predicts AI will add $15.7 trillion to the global economy by 2030, and a lot of that value will be driven by the tech giants in this ETF. Nevertheless, it's never a good idea to put all of your eggs in one basket. This Vanguard ETF is a great buy primarily for investors with a diversified portfolio that has little or no exposure to the Magnificent Seven stocks already. Should you invest $1,000 in Vanguard World Fund - Vanguard Mega Cap Growth ETF right now? Before you buy stock in Vanguard World Fund - Vanguard Mega Cap Growth ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund - Vanguard Mega Cap Growth ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $660,821!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $886,880!* Now, it's worth noting Stock Advisor 's total average return is791% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Costco Wholesale, Intuit, Meta Platforms, Microsoft, Nvidia, Tesla, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
