2023-05-22 09:46:00
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Investing.com – Bank of America confirmed in a recent recommendation to sell US stocks, at a time when the bank sees technology and artificial intelligence stocks as a “bubble”.
The bank issued a recommendation to sell the “S&P 500” index at the current level of 4,200 points. Pointing out the possibility that the Federal Reserve will not finish raising rates, as the rise in bond yields represents a risk.
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He pointed out that the Fed’s fixation of interest rates may lead to a rise in US bond yields above 4%.
The bank said that the Fed may move towards more interest rate increases, adding that the rise in bond yields poses a risk.
Technology stocks started 2023 with a bang, as shares of major technology companies including Meta (NASDAQ:) and Amazon (NASDAQ:) stocks soared. The gains are largely due to the industry’s exposure to artificial intelligence, which has seen a surge in popularity among investors following the rise of human-like language tool ChatGPT.
Strategists, led by Michael Hartnett, wrote in a recent note that if the Federal Reserve temporarily “wrongly” stops raising interest rates this year, US bond yields will reflect that by exceeding 4%, and if that happens, the “reserve” cycle will certainly not end. Federal Reserve to raise interest rates.
Bank of America analysts said that artificial intelligence is currently considered a “small bubble”, and pointed out that previous bubbles always start with monetary easing and end with raising interest rates.
Biggest slap
Analysts also pointed to the lesson of 1999, when a steady rise in Internet stock prices and strong economic data triggered the return of the Federal Reserve to begin monetary tightening, and the technology stock bubble burst nine months later.
Strategists believe that the biggest blow that traders may receive in the next twelve months is the Federal Reserve raising interest rates to 6%, instead of reducing them to 3%, as the market is likely to cut interest rates.
It is worth noting that outflows from equity funds amounted to 7.7 billion during the week ending May 17, while bonds witnessed inflows over the past eight weeks.
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