In One Chart: Stock market’s ‘ultimate lows’ are still forward as investors have not nonetheless capitulated, says B. of A.

Investors haven’t capitulated in this year’s beaten-up batch market, according to strategists during B. of A. Global Research.

With new fear and “loathing” suggesting that holds are disposed to a bear-market rally, “we do not consider ultimate lows have been reached,” B. of A. investment strategists pronounced in a investigate news antiquated May 12. “True capitulation,” they said, is “investors offered what they love.”

U.S. holds rallied Friday, with a SP 500
SPX,
+2.39%
,
Dow Jones Industrial Average
DJIA,
+1.47%

and Nasdaq Composite
COMP,
+3.82%

shutting neatly higher. Still, all 3 vital benchmarks requisitioned another week of losses, with a Dow pang a seventh true weekly decrease for a longest losing strain given Jul 2001, according to Dow Jones Market Data. 

The “exodus” has begun, though usually 3 of a 10 “capitulation indicators” tracked by B. of A. have been checked off, according to a strategists. Those 3 embody money levels and financier expectations for distinction and mercantile growth, a news shows.

Below is a checklist for those indicators, some of that are tied to a bank’s tellurian account manager surveys. It shows how today’s marketplace stacks adult opposite a ripping of a dot-com bubble, a tellurian financial crisis, Europe’s debt predicament and a quick, high tumble sparked by COVID-19 fears in 2020.


BOFA GLOBAL RESEARCH REPORT DATED MAY 12, 2022

Capitulation indicators related to interest-rate expectations, equity flows, batch allocations of Bank of America Corp.’s private clients and item allocations to equity and holds seen in B. of A.’s account manager surveys, have not nonetheless been checked off.

Rate cut expectations are always seen during bear-market lows, a strategists said.

Investors have been awaiting seductiveness rates to rise, as a Federal Reserve has signaled it will continue to lift a benchmark rate to fight high inflation.

Read: Fed tightening comes ‘fraught with volatility’ in a batch market, though this JPMorgan portfolio manager says he isn’t betting on a U.S. recession

For each $100 of inflows in a past few weeks, a strategists have seen “just $4” of redemptions, according to a report. That compares with some-more than $50 of outflows for each $100 of inflows in past bear markets, a strategists wrote.

So distant equity redemptions volume to 0.2% of resources underneath management, or AUM, their note shows. The strategists pronounced outflows were around 3 to 6 percent of resources underneath government during before lows.

To accommodate B. of A.’s defeat criteria, account managers would need to underweight stocks, with lows requiring a -20 to -30% allocation to equities and investors shutting underweight bond positions, a strategists said. Also, private clients in Bank of America’s tellurian resources and investment government section pulled behind their equity allocations to during slightest 56% in before bear-market lows, they wrote in a report.

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